Supply Chain

After Dhaka, a Chance to Build a More Humane Supply Chain—and a Stronger Brand

By Jez Frampton

By now, almost everyone in the world knows what happened in Dhaka, Bangladesh: an eight-story garment factory collapsed, killing over a thousand workers and injuring even more. The incident was not only one of the deadliest industrial disasters in history—it was also, we later learned, a senseless and preventable tragedy. As protestors took to the streets in Bangladesh and the world looked on in horror while the death toll crept upward by the day, unscrupulous local factory owners and lax regulators came under fire—and then the focus turned to brands.

As soon as the first label was plucked from the rubble—implicating Canada’s Joe Fresh brand—it was only a matter of time before others surfaced: JCPenney, Disney, Walmart, Benetton, Spanish high street brand Mango, and Britain's Primark chain, among others. A flurry of sympathetic press statements and promises followed, but with a disaster of this scale, lip service alone would no longer suffice.

Brands under fire

Blame has rightly fallen on the shoulders of factory owners who violated or maneuvered around construction codes and willfully ignored conditions that were likely to endanger workers. Some, pointing a finger at the Bangladeshi government, estimate that as many as half the garment factories in Bangladesh are structurally unsafe and lacking basic safety features like fire escapes or extinguishers. But don’t brands also bear some responsibility for factory conditions? After all, it is the global apparel companies’ demand for ever-lower prices that drives workers and owners alike to take risks with safety and health, day after day. As such, many believe brands that benefit from low-cost production overseas have an obligation to ensure reasonable protections for the workers whose toil makes extremely low prices—and higher profits—possible.

Even companies with the best intentions can’t guarantee the well-being of workers in a slippery, complex global supply chain, with layers of temporary subcontractors. Suppliers can subcontract without a brand’s knowledge, as was the case with Apple and Foxconn, leaving a brand vulnerable—but also ensuring that responsibility for any corporate stumbles are spread thinly. With so much wiggle room—and so many unknowns in the picture—it’s hard for any company to credibly claim that its products are ethically sourced. Walmart, Gap, and Nike have already acknowledged that auditing the supply chain is not enough to improve safety. Is that a problem? We think it is.

How ethics impact perception—and your bottom line

There is a reason corporate responsibility efforts have grown over the past two decades: people care. People want to know how the cows that produce their milk are being treated, whether GMOs are present in their cereal—and whether their clothing was made in a sweatshop. And as they grow more aware of where the things they buy come from and under what conditions they were produced, they increasingly choose brands that operate in a way that is consistent with their moral values.

So, what happens when a supply chain mishap—or a complete disaster, in the case of Dhaka—makes a brand “guilty by association”? Well, it depends on how the brand handles the predicament. If the brand owns up to negligence or lack of awareness, apologizes, and promises to do better, consumers are forgiving and, after a brief hiccup, business goes on as usual. But, brands that put distance between themselves and the incident, that play the blame game, turn a blind eye, or refuse to comply with suggested courses of action that could ameliorate the situation tend to lose face or even incite outrage. This can do long-term damage to reputations and even impact sales.

Meanwhile, an enterprising development in the tech world has brought a whole new level of sophistication to consumer protest. A new “Buycott” app, giving disgruntled consumers an easy way to dampen business, allows consumers to scan any item and the app will trace its corporate ownership. According to Buycott’s website, “a campaign can be quickly created around a cause, with the goal of targeting companies with a boycott unless they change their position, or buycotting a company to show your support.” “Buycott,” a reward for ethical behavior being, of course, the opposite of a “boycott.”

Armed with new digital tools and instantaneous communication and organizing capabilities through social media and the internet, there is nowhere left to hide. If Dhaka has any lessons for brands, it’s that they can no longer afford to outsource their ethics or cut corners when it comes to health and safety.

The buck stops at Dhaka

Now that the consequences of supply chain risks are clear for all to see, it is time to reexamine priorities, explore solutions, and get serious about ensuring a more humane supply chain that will create value for your brand, rather than repeatedly tarnish it. In our experience, the following steps are vital to building a more safe and transparent supply chain that will protect workers across the globe, as well as your brand:

Make a clear and binding commitment

Many companies make public promises about supplier-driven problems and worker safety but, too often, the efforts are short-lived or amount to little more than a PR campaign. The global retailers that signed onto the safety plan for Bangladesh without undue hesitation signaled their commitment to improving factory safety and demonstrated leadership by stepping forward when others stalled. A sign of their strength, the supporters of the plan will play an active role in shaping a future supply chain that will keep accidents to a minimum and earn the trust of stakeholders. Both consumers and investors are more likely to invest in, and remain loyal to, brands that take responsibility for their impact and show willingness to address areas of concern—not just when the heat is on, but for the long-term.

Engage with government

The incidents in Bangladesh—from the factory collapse to fires that killed hundreds—show that corporate social responsibility campaigns can’t succeed on their own. Collaboration between retailers, governments, NGOs—and even competitors—is essential to introducing, enforcing, and maintaining higher standards in an extended supply chain. The Cambodian garment industry, for example, offers evidence that stronger public-private cooperation could lead to better outcomes. Enforced by the International Labor Organization in the Better Factories Cambodia program, the country’s trade agreement with the United States made imports from Cambodia conditional on improved labor standards.

Actively help rebuild infrastructure and improve working conditions

After the promises are made, collaborators are consulted, and solutions are discussed, action must follow. In the case of Bangladesh, signing on to the International Labor Rights Forum's Bangladesh Fire and Building Safety Agreement, in the eyes of many, is a significant first step toward meaningful action. PVH, the parent company of Calvin Klein, Tommy Hilfiger, and Izod, signed on to the plan—which calls for independent, rigorous factory safety inspections as well as mandatory repairs and renovations—and contributed $2.5 million toward factory safety improvements. Though Gap Inc. has resisted signing on to the Bangladesh safety plan, the company deserves credit for hiring a fire inspector and committing $22 million in loans for factory improvements to help improve conditions for workers. As The Economist pointed out, the cost of ensuring safety is more than achievable. According to Scott Nova of the Workers’ Rights Consortium, “it would cost $3 billion to make all 5,000 clothing factories in Bangladesh safe. Spread over a few years, that would amount to only a few cents on the cost of each garment produced.” By offering resources and highlighting mutual benefits, brands can encourage and support positive change in the countries where their products are manufactured.

Create a coalition of the willing

When announcing its move to sign the safety agreement, H&M said that “in order to make an impact and be sustainable,” the agreement would need “a broad coalition of brands.” Indeed, a coordinated group of brands—with a unified message—will be necessary to address employment issues effectively. Leading brands influence other leading brands and H&M, being the single largest producer of apparel in Bangladesh, was in a unique position to build momentum for change. As the classic adage goes, “with great power comes great responsibility.” Brands wield enormous power—and they can use it to either ruthlessly exploit or change the world for the better. And, of course, when brands join forces, this power multiples exponentially. Working with suppliers, governments, trade unions, and organizations like the Ethical Trade Initiative, brand-led partnerships can spur change through collective lobbying efforts to improve working conditions for millions.

The courage to change

The incident in Dhaka has brought the plight of low-wage workers into sharp relief—not unlike the Triangle Shirtwaist Factory inferno that killed 146 (mostly young women) in New York City in 1911. At a time when there were almost no state or federal regulations on minimum wage, child labor, health and safety, or pensions, the industrial disaster shocked the world and galvanized a movement that inspired unprecedented reforms and transformed American working life for the better. We have to ask ourselves why we would want to subject any worker in the world to the kinds of conditions that we have deemed unacceptable—and outlawed—in the West? In the wake of Dhaka lies a watershed opportunity for organizations to take greater responsibility for the actions of their extended supply chain.

In the short term, brands may incur added cost by compensating those impacted by disaster and changing the way they operate in places like Bangladesh. While that may not be favorable to the balance sheet this quarter, in the long run, any brand that champions efforts to create a more humane supply chain is a brand that today’s informed customers will choose over brands that are known to exploit or overlook abuse. Brands have a chance to pivot, to rebuild, and improve their supply chains. Brands have a chance to empower both workers and consumers and build a more positive, transparent image that can be leveraged to strengthen brand value. This is the moment, but the question is: are brands willing to step up? The road ahead may seem daunting, but preventing another Dhaka begins with the desire to do so—and the courage to lead.