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Making a True Commitment to Compliance

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Rana collapseAmidst new industry buzzwords, it’s important not to leave CSR behind, or view it as a ‘passing trend’. In her first exclusive feature for WhichPLM (originally running in our Annual Review 2014), Anneke Magendans brings years’ worth of experience in sourcing and supply chain management complemented with a master’s degree in Corporate Social Responsibility, and a real and demonstrable passion for her adoptive home of Bangladesh to bear on the difficult subject of “lip service” and “risk management” where compliance – and lives – are concerned. Viewed through the lens of the Rana Plaza collapse and Tazreen fire disaster, Anneke’s article is essential reading for any retailer or brand for whom transparency is currently just a buzzword. To compliment this piece, CSR expert Chris McCann will be gracing us with another exclusive article later this week. 

AnnekeThe textile and clothing industry has played an important role in the world’s industrialisation and development process. The industry has one of the largest and most complex supply chains, ranging from cotton farming and chemical production of fibres to manufacturing and selling of finished products. As products from each part of this value chain can easily be exported, it makes the sector trade-intensive.

This has provided an excellent foundation for export oriented industrialisation, where a country’s industry is upgraded by exporting goods for which it has a comparative advantage. The race to the bottom, the always ongoing search for the cheapest source of labour and the lowest production costs, has initiated globalisation. This has been fuelled by the liberalisation of world trade. With trade barriers falling away, decreasing import and export tariffs, and the disappearing costs of international financial transactions, it became much easier for companies to operate on a global scale. And this has resulted in the wide dissemination of the textile and apparel industry in Asia as we know it today.

Globalisation, too, has created an imbalanced power relation between global brands and their suppliers in developing countries. Factories and their workers in Asia are contracted by modern retailers and brands because they straddle a fine line between capacity and cheapness – the ideal supply chain partner being one who can produce the quantities required, to the quality standards that will pass muster, more cheaply than a counterpart elsewhere in the world. The onus to live up to these criteria is (and long has been) on the part of the factory, since a host of geopolitical conditions have conspired to create a situation where, should they fail to deliver against any of these metrics, a supplier can quickly and easily be replaced.

At the same time, though, the enormous power that brands wield over industry in emerging markets has made them vulnerable, too. They are under the constant surveillance of ‘global civil society’, and being publicly scrutinised for corporate negligence poses serious risks to their corporate image and brand reputation. This led to the implementation of voluntary codes of conduct to demonstrate responsible business behaviour, indicating to consumers that their products were made under decent working conditions. Social audits were conducted to monitor compliance with these codes. A next step in managing social compliance was the establishment of multi stakeholder initiatives in which the business community cooperates with unions, environmental and human rights organisations; joint codes of conduct were drafted and proper – third party – monitoring ensured.

Most codes of conduct draw on important international labour standards that protect workers’ rights such as International Labour Organization (ILO) conventions, declarations of the United Nations (UN) as well as guidelines of the Organization for Economic Co-operation and Development (OECD), including the Ruggie Framework.

On the 24th of April 2013, an eight floor building collapsed in Savar, on the outskirts of Dhaka, Bangladesh. The Rana Plaza building housed a bank, shops and several residential apartments but also, although the edifice had not been constructed for this purpose, several garment factories. The collapse killed over 1,100 people, and more than 2,000 people were injured. Even though many companies operating in Bangladesh have a corporate code of conduct, aiming to improve working conditions, these numerous voluntary efforts could not prevent this disastrous accident from happening. It now became apparent that cooperation on a much larger, global, scale, involving international brands and retailers, (international) unions, NGO’s and governments was called for. This resulted in the development of the Accord on Fire and Building Safety: an unambiguous, comprehensive and unified legally binding agreement, which was signed in May 2013.

The Accord is not unique; a group of North American apparel companies have initiated the Alliance for Bangladesh worker safety. Following the Tazreen Fire in November 2012, the Bangladeshi government has launched the National Tripartite Plan of Action (NTAP) on Fire Safety for the Ready-Made Garment Sector in Bangladesh. The plan aims, besides other objectives, to provide a platform for cooperation for stakeholders wishing to initiate fire safety promotion activities. Initially the NTAP was to prevent fire related accidents. Only after the Rana Plaza collapse was building safety included. To ensure an integrated approach the government has asked ILO to play a coordinating role in its implementation.

The aim was cooperation between all initiatives, but reality has turned out quite differently, as some fundamental differences and a lack of trust between the Accord and the Alliance seriously detracted from this effort. The Accord criticizes the Alliance for lack of transparency, since they do not make their safety inspection reports publicly available. This leads to the Accord questioning the quality of the safety inspections performed by the Alliance, doubting that they will meet the Accord’s safety standards.

In fact, common safety standards already exist in a seventy-two page document, largely based on the Bangladesh National Building Code (BNBC), and were mutually agreed upon by all parties involved after seven month’s negotiations last year. Unlike the Accord, where signatories are obliged to ensure necessary funds to cover the costs of renovations and ensure continuation of workers’ salary payments in case of factory closure, under the Alliance these obligations are voluntary. This leads to confusion and frustration, especially in cases where signatories from both initiatives source from the same factory.

The Alliance is designed and governed by corporations with no involvement from independent worker representatives. Not surprisingly, unions and labor activists target the Alliance with scathing criticism, accusing it of being meaningless. The Accord is developed in cooperation with both Bangladeshi and global unions, and labor rights NGOs, and is jointly governed by companies and worker representatives. Alliance supporters, in turn, therefore accuse the Accord of using their initiative merely as a stepping stone for establishing power.

This is just one example amongst many of a total lack of cooperation between different initiatives aiming to improve social, environmental and safety standards. Many international buyers adhere to many different management systems, such as BSCI, WRAP, ETI etc. The variation in standards, audit processes and methodology prevents buying companies from recognising and accepting the various audit reports. This, again, puts enormous pressure on the suppliers as they have to undergo many different audits each year, often also bearing the costs.

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This of course applies to the garment industry on a global scale. However, with all eyes on Bangladesh after the Rana Plaza collapse, it is particularly tough on the Bangladeshi suppliers. Without a doubt, trust is one of the main critical success factors when multiple parties are involved in the realisation of a joint goal.

The involvement of multiple actors leads to complexity, uncertainty and ambiguity due to a difference in individual perceptions and conflicts of interest.

In Bangladesh, all the different actors have the same objective: a structural improvement of safe working conditions in the RMG sector; yet, all players have their own – commercial – interests to consider as well. But if international buyers and retailers are really committed to improving the lives of the Bangladeshi garment workers it is high time that they start to cooperate and be transparent instead of just talking about it. Where they have not done so already, these organisations should consider the adoption of PLM (in conjunction with appropriate extended solutions designed to manage transparency and traceability) to house and manage the kinds of complex data, methods and practices that go into achieving effective supply chain transparency, and promoting and nurturing brand standards across their entire global network.

Without the oft-cited crutch of poor data visibility to lean on, the only arguments for non-compliance then become commercial or moral in nature. And in either case, I (and the modern consumer) would argue that the time has come to change from a pure risk and brand management approach to one that showcases true commitment to evolving us as an industry and as a species.

Lydia Hanson Lydia Hanson has been part of the WhichPLM team for over six years now. She has a creative and media background, and is responsible for maintaining and updating our website content, liaising with advertisers, working on special projects like the Annual Review, and more.Joining mid-2013 as our Online Editor, she has since become WhichPLM’s Editor. In addition to taking on writing and interviewing responsibilities, Lydia has also become the primary point of contact for news, events, features and other aspects of our ever-growing online content library and tools.