Editor’s note: Sarah Labowitz is cofounder, codirector, and a research scholar in business and society at the New York University Stern Center for Business and Human Rights. She is the coauthor of “Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza” in response to the factory collapse in Bangladesh that killed more than 1,100 workers and injured almost 2,000 others.
She spoke to APICS magazine Editor in Chief Jennifer Proctor about how the Rana Plaza tragedy continues to influence supply chains in all sectors.
Proctor: What’s the current status of garment factories in Bangladesh? Have things improved since the Rana Plaza factory collapsed in 2013?
Labowitz: I think it’s important to understand that there are at least two tiers of garment factories in Bangladesh that [have received] a lot of investment. First is the buyers of the American and European brands that are part of the accord in the alliance. (See sidebar.) There’s a lot of attention and inspection from members that are improving factories in that frontier.
There are 7,000 factories in Bangladesh; 1,900 of them are part of these two [buyer groups]. The question that would make me nervous as a supply chain manager is, what about the other 5,000 factories that probably are in some respect touching the second and third tier of your supply chain? The peril is that it’s not hard to identify the brand that’s being sold. [Just] because you may not be seeing that second- or third-tier supplier, if something bad happens within one of those factories, it will be quite obvious that your product is from that factory.
Proctor: That goes to my second question: Why is this a problem for global corporations and well-known brands? You said in your report that millions of workers and thousands of unauthorized factories are working for those brands. Can we talk about the importance of transparency in the supply chain?
Labowitz: There are changing expectations around transparency generated by the growth of civil society in developing countries and their labor and human rights. Organizations that are reporting and investigating abuse increasingly use technology and connectedness—connection on social media or video. Using [these kinds of connections also] is perfect for the supply chain.
The other trend that we’re seeing is around different and new forms of investigative journalism doing deep dives into company practice. Then, there are data leaks and everything else. That all [creates a need for] greater transparency about business operation in places that used to seem much farther away. It elevates the importance of finding answers and understanding where the product is really being made, not just at the level of the first-tier supplier.
Proctor: We know China is still the world’s biggest garment and textile manufacturer, but often those companies actually are subcontracting to countries such as Bangladesh.
Labowitz: That doesn’t surprise me at all. From the prospective of supply chain managers, there are risks in your supply chain that you won’t see.
Proctor: You just said the magic word, “risks.” Supply chain professionals want to mitigate risks in their supply chains. How are labor rights related to supply chain risk? Labowitz: It’s really hard because there is this tension we talk about from where we stand—a tension between visibility and responsibility. The consensus that emerged in the 1990s was that companies are responsible for enforcing labor rights when governments can’t or won’t. But what if you think you’re going to be responsible only for everything that you see? And what if you see only the compliance part of a project with all the really messy, difficult stuff? Who is going to take this [risk] out? Is that your responsibility? That’s why we talk about this model of shared responsibility. How do you engage not only companies and their first-tier suppliers, but also governments and unions in these vital issues in the supply chain?
Immediately after the factory collapse, APICS received messages from members and others in our community urging us to communicate that one of the most important things that supply chain managers can do is to move all of their business from Bangladesh. But people there rely on their factory jobs to live. Why is it important to help fix the problems instead of relocating altogether?
I asked [the people I interviewed in Bangladesh] if they have a message for consumers in the United States and across the world. Their response was to tell people to keep placing orders. The garment sector in Bangladesh has been a big driver of employment and a pathway out of poverty for the country’s workers. I do think that it’s important to recognize the power of business to generate jobs. With this kind of growth comes the responsibility of these and other stakeholders to ensure that their products are being made in accordance with business standards. One of the appeals of Bangladesh is that it’s so cheap. One of the reasons that it’s so cheap is that the contracting doesn’t account for [business] standards.
Proctor: Your research focuses on garment workers in Bangladesh. Are there lessons here for all companies operating international supply chains?
Labowitz: I think so. In dealing with low-wage industries, there are risks of nontransparent and non-regulated subcontracting. If I was a supply chain manager, then those would be high up on my list of things that keep me up at night— and not just because of the labor-intensive nature, but because products can be moved around without your knowledge.
Proctor: After the Rana Plaza factory collapse, do you think end consumers are more aware of where their products are coming from?
Labowitz: I think it’s very hard to be an ethical consumer right now. There’s so little credible information that would allow you to compare one company versus another when it comes to issues like labor rights or sustainability in the supply chain. I think that these are difficult issues. I talk to enough media people to know that bad working conditions in the supply chain are a downer story that bums consumers out. Consumers do care, but there’s not a lot of clarity about how to express that concern.
For example, there is a strong sentiment against fast fashion in some parts of the activism world. I’m not against fast fashion from a labor perspective. Fast fashion can be a driver of huge employment … and has the potential to be a good thing in a country like Bangladesh.
Proctor: In your December 2015 report, “Beyond the Tip of the Iceberg: Bangladesh’s Forgotten Apparel Workers,” you include a series of recommendations for leaders of corporations, governments, and unions. Is there a role in this overall discussion for the supply chain manager? Would you recommend that they start lobbying their CEOs? Or should their involvement be in the daily decision making?
Labowitz: I have huge respect for supply chains. I think they hold a lot of power. At the end of the day, the way that a supply chain is managed has a lot to do with how workers are treated in that supply chain. Supply chains that prioritize and control their transparency and long-term relationships with suppliers are better for workers.
The principles of good management within a supply chain accrue benefits to the workers who are at the end of the chain. I spend a lot of time in the corporate social responsibility (CSR) and business human rights world, and there’s a lot of talk about policies and commitments. It’s very helpful to have the buy-in of the CEO and the leadership from the top. But, as these issues play out, they rely on the supply chain manager. How are you placing orders? What are your relationships like with your suppliers? Do you take into account the full costs of compliance? Supply chain managers have a lot of influence over the working conditions.
Proctor: What’s on the horizon in the business world regarding human rights in the supply chain?
Labowitz: One of the big debates now in the business and human rights worlds is about government procurement. There is an appetite to use the power of government procurement to impose more obligations on companies in terms of supply chains and due diligence.
Proctor: What is your current research focusing on?
Labowitz: We’re going to publish later this year a new report about the recruitment of migrant workers in the construction industry. There really has been this migration from South Asia to the Persian Gulf, and we are researching how to measure social issues and investment context. How do you measure [CSR] so that investors can reward high performers? I also have a continuing interest in the garment sector.
The Risks of Indirect Sourcing
The majority of workers in Bangladesh’s 7,000 garment factories are unprotected by international safety initiatives, according to a report from the New York University Stern Center for Business and Human Rights. The unprotected factories are small and medium sized and serve as indirect sourcing facilities.
“Our research shows that indirect sourcing is an essential element of Bangladesh’s low-cost, high-volume model of garment production,” says Sarah Labowitz, cofounder, codirector, and a research scholar in business and society at the center and coauthor of the report “Beyond the Tip of the Iceberg: Bangladesh’s Forgotten Apparel Workers.”
“Though global brands assert that they have strict policies against unauthorized subcontracting, in reality, millions of workers at thousands of smaller factories are producing their goods,” Labowitz says. “Working in these factories is often highly risky, yet virtually no international resources are being applied to them.”
Labowitz, her coauthor Dorothée Baumann-Pauly, and their team analyzed publicly available data and conducted field research in Bangladesh to present the following five key findings:
- There are more than 7,000 factories in Bangladesh that produce goods for export. These include factories that provide direct and indirect sourcing.
- One survey revealed that 32 percent of the 479 factories surveyed worked as informal subcontractors, and 91 percent of those informal subcontractors exported at least a portion of their products.
- The Bangladesh Accord for Fire and Building Safety and the Alliance for Bangladesh Worker Safety are two programs that were created immediately following the Rana Plaza disaster. Although more than 200 global brands and retailers have signed the agreements, they encompass only 27 percent of Bangladesh factories.
- Despite thousands of inspections, the safety in very few factories has actually improved.
- Global brands, governments in North America and Europe, and international lenders have announced commitments of more than $280 million to improve factory safety in Bangladesh.
A full copy of the report is available at http://tinyurl.com/z9cpcal.
Jennifer Proctor is editor in chief for APICS magazine. She may be contacted at email@example.com.
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