Persistent human rights abuses in global supply networks continue to challenge corporate responsibility efforts, despite years of reform initiatives. While many multinational companies pledge ethical sourcing, their oversight often stops at first-tier suppliers, leaving deeper-tier laborers—such as garment workers in Bangladesh or cobalt miners in the Democratic Republic of Congo—exposed to exploitation. Collaborations between large corporations and international NGOs may appear inclusive but frequently fail to produce meaningful improvements on the ground. A more effective approach involves integrating local civil society organizations into governance structures, leveraging their proximity and cultural insight to create lasting change.
Research published in the Journal of Business Ethics, based on 54 interviews across 20 countries including Mozambique, Vietnam, and Brazil, reveals that grassroots groups possess critical knowledge about working conditions yet are routinely excluded from decision-making. One activist in Mozambique noted that in certain regions, corporate influence surpasses that of local governments, highlighting a power imbalance that undermines equitable development. When solutions are designed without input from affected communities, even well-intentioned programs often fall short.
The European Union’s Corporate Sustainability Due Diligence Directive (CSDDD) initially aimed to enforce accountability across multinational operations. However, its revised scope—limited to firms with over 5,000 employees and €1.5 billion ($1.73 billion) in annual revenue—reduces its impact and excludes many smaller but influential actors. This narrowing weakens the directive’s ability to drive systemic reform, especially in complex, opaque supply chains where enforcement from distant regulatory bodies proves ineffective.
An alternative model, termed “locally grounded governance,” promotes decentralized, adaptive oversight. Rather than relying solely on top-down audits, this framework fosters collaboration among local NGOs, suppliers, unions, and companies to co-create monitoring systems, grievance mechanisms, and preventive strategies. For example, automotive manufacturers like BMW, Mercedes, and ZF partnered with civil society groups in Germany and Mexico to develop a complaint system tailored to local contexts. Oliver Winter, BMW’s Human Rights lead, emphasized that local actors bring essential knowledge that complements corporate compliance efforts.
Such inclusive models yield tangible benefits. First, they provide more accurate risk intelligence. Local organizations have uncovered instances of unauthorized subcontracting to unregistered factories—information rarely captured in formal audits. Second, ongoing engagement builds trust with workers, enabling open dialogue and joint problem-solving. In Bangladesh, long-term cooperation between unions and suppliers helped transform adversarial relationships into constructive partnerships, leading to measurable improvements in safety and wages.
Third, involving rights-holders enhances corporate legitimacy. The Bangladesh Accord on Fire and Building Safety granted inspection authority to local unions, resulting in verifiable safety upgrades. Although concerns remain about the sustainability of such models after transitioning oversight to national bodies, the initial success underscores the value of inclusive governance.
To implement this shift, business leaders should: (1) include grassroots organizations and labor representatives in due diligence design; (2) build transparent, trust-based partnerships; (3) invest in local capacity and protect partners from retaliation; (4) adopt flexible systems that evolve through continuous feedback; and (5) reward suppliers who proactively report issues rather than conceal them.
Ultimately, locally rooted governance bridges global standards with on-the-ground realities. It recognizes that sustainable progress depends not just on rules, but on relationships, and that inclusive dialogue—even when contentious—can strengthen accountability and protect the dignity of those who power global commerce.
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How supply chains can benefit from adaptive local governance
From garment workers in Bangladesh who sew through 14-hour shifts to Congolese cobalt miners digging with bare hands, human rights violations in global supply chains persist despite years of reform. Many multinationals promise supply chains free of violations, yet most can’t see past the first-tier suppliers. The people most affected remain unseen and violations go unaddressed.
Even in corporate initiatives to improve human rights, the people who understand local conditions best, activists and community groups, are rarely included in decision-making. Partnerships between multinationals and large NGOs often look participatory but fall short of real change. As one civil society representative told us, “We get audited, but we never get asked.”
The European Union’s initially proposed Corporate Sustainability Due Diligence Directive (CSDDD) represents a significant step towards holding multinational corporations to account for their human rights and environmental impacts. The EU’s recent decision, however, to limit the directive’s scope to companies with more than 5,000 employees and €1.5 billion ($1.73 billion) in turnover significantly weakens its reach and dilutes its original ambition.
This narrowed directive is a missed opportunity. Real accountability requires broader measures aligned with the United Nations Guiding Principles on Business and Human Rights. Rules written in Europe are difficult to enforce across vast and opaque supply chains. When oversight is separated from the places where violations occur, compliance risks become a formality.
Discover
How is the Forum helping to navigate global value chain disruption?
The world economy is facing a perfect storm of disruptive megatrends, ranging from the climate crisis to geopolitical tensions and emerging technologies. These are challenging the foundations on which global value chains are built. And while issues affect various industry sectors in different ways, there are unique opportunities for pioneers to build resilience and shape the supply chains of the future.
The World Economic Forum has been working with a community of manufacturing and supply chain leaders to anticipate how manufacturing companies can best move beyond reactively responding to disruptive forces towards proactively building the right set of capabilities to ensure long-term and sustainable resilience.
This work has resulted in the co-development of the resiliency compass, a unique framework aimed at helping manufacturing organizations assess their current level of resilience across eight dimensions:
portfolio excellence
customer orientation
financial viability
go-to-market versatility
logistics flexibility
manufacturing adaptability
supplier diversity
advanced planning
Through our work across industries and geographies, we also identified five profiles of resilience leadership, reflecting distinct priorities and approaches to starting and navigating a resilience journey: the collaborator; the planner; the enhancer; the adapter; and the provider.
To further help firms build and implement new resilience efforts and roadmaps, a series of strategy playbooks were co-developed in close collaboration with members of the Platform for Shaping the Future of Advanced Manufacturing and Value Chains. These playbooks outline the set of actionable strategies employed by leaders within each resilience profile to fortify their value chain.
Locally grounded governance
Our study, published in the Journal of Business Ethics, draws on 54 interviews with civil society organizations across 20 countries, from Mozambique to Viet Nam and Brazil. These local groups have the deepest understanding of working conditions and community realities, yet they are the least involved in shaping solutions.
Local civil society organizations describe a familiar pattern: key decisions are made by multinationals, with grassroots groups consulted only after the fact. One activist in Mozambique observed that in some contexts, companies appear to hold more influence than local governments. It is a reminder of the imbalance that multinationals inherit and the responsibility that comes with it.
This exclusion is unethical and ineffective. Power imbalances and mistrust mean that even well-intentioned initiatives rarely change the daily lives of workers. Expanding audit checklists without redistributing power only reinforces the same structural problems. Our interviews show that meaningful progress happens when local civil society organizations are treated as partners and empowered to help design grievance systems, verify compliance and shape preventive measures.
We call this a “locally grounded governance model” – an adaptive, decentralized way of managing global supply chains that builds collaboration into the system, rather than imposing it from the top.
From linear control to adaptive collaboration
For decades, corporate governance in global supply chains has followed a linear model: headquarters set standards, suppliers comply and external auditors verify. This compliance cascade appears efficient on paper, but it is rarely so in practice. It assumes that rules flow downwards and information flows upwards naturally, a structure that often hides, rather than solves, abuse.
Our research demonstrates that governance becomes more effective when it reflects the realities of local communities and builds trust among the people it seeks to protect. Top-down systems often reproduce the very inequalities they aim to fix, while locally grounded models leverage proximity, cultural understanding and accountability to drive meaningful change. Local civil society organizations, home-country NGOs, suppliers and companies co-design systems for remedy and prevention that evolve over time. They talk, test and adjust.
One example of this shift can be seen in the global automotive sector, where BMW, Mercedes and ZF worked with civil society actors from Germany and Mexico to develop a complaints mechanism for Mexican supply chains. Oliver Winter, head of Human Rights at BMW, emphasized that civil society is involved because its capabilities and local knowledge are needed to complement corporate efforts. This initiative shows how companies and civil society organizations can begin to improve the accessibility and responsiveness of grievance processes.
Although civil society groups have cautioned that such collaborations remain a work in progress, particularly when it comes to including rights-holders, such as Indigenous communities, directly in decision-making.
Businesses that embrace locally informed governance achieve more just working conditions and gain three key advantages. First, they get more accurate and timely information about risks. In our study, local civil society organizations described uncovering cases where suppliers secretly subcontracted production to unregistered facilities, information that never reached the multinational headquarters. Local civil society organizations are able to surface abuses that formal audits often fail to detect.
Second, they build stronger, trust-based relationships with workers and communities. Unlike external auditors who visit infrequently, local civil society organizations are embedded in the daily realities of those affected. Their ongoing presence helps overcome fear and mistrust, allowing workers to speak openly and engage in joint problem-solving. In our study, several civil society organizations described how long-term cooperation with trade unions turned tense supplier relationships into constructive dialogue that led to gradual improvements in working conditions.
Third, companies gain higher legitimacy among regulators and stakeholders. When businesses involve local civil society organizations and rights-holders in governance processes, their human rights efforts are no longer perceived as public relations exercises, but as credible, inclusive initiatives. The Bangladesh Accord on Fire and Building Safety, for instance, for the first time, gave local unions and inspection teams a formal oversight role. It led to measurable improvements in workplace safety and inspired similar binding agreements in other sectors. Yet, its later transition to a national oversight body has raised concerns about whether such mechanisms can maintain their independence and effectiveness once corporate and political interests reassert influence.
By connecting policy to practice, local civil society organizations act as social intermediaries, translating abstract commitments into concrete, lived improvements.
Recommendations for business leaders
1. Involve local actors in decision-making
Include grassroots groups, labour unions and rights-holders in designing and monitoring due diligence. Their proximity and cultural understanding make their input more accurate and credible.
2. Invest in trust-based partnerships and remove barriers
Engage consistently and share information openly to build trust and reduce power gaps.
3. Support local capacity and safety
Fund and train local partners and ensure they can act without fear of retaliation. Many civil society organizations remain underresourced and excluded from early decisions, despite their crucial role.
4. Make governance adaptive
Replace rigid checklists with agile systems that learn from continuous, local feedback. When information from those closest to the risks feeds into decisions, oversight becomes responsive and protective.
5. Reward transparency
Acknowledge suppliers that surface and address problems, instead of hiding them. Real progress depends on openness, not perfect audit scores.
Locally grounded governance connects global ambition with local insight. It accepts that progress depends not only on rules, but on relationships and that conflict, when handled openly, can strengthen collaboration. When corporations open that space, due diligence becomes more than a legal requirement. It becomes a practice of trust and the most reliable way to protect the dignity, rights and livelihoods of the people who make global business possible.