Executive Briefings

Who Cares About Conditions in Overseas Factories?

On March 25, 1911, fire swept through the Triangle Shirtwaist factory in New York City. One hundred and forty-six garment workers perished in the blaze, many of them trapped in the building because management had locked the exit doors. The youngest of the victims were 14. It was a horrifying tragedy, not atypical of working conditions during the so-called Progressive Era. Can we not, however, take comfort in knowing that those times are far behind us?

Who Cares About Conditions in Overseas Factories?

Not a chance. Recall the headlines of just the last few months. Three separate disasters in Bangladesh garment factories alone: the November, 2012 fire in Tazreen, where 112 people died due to "gross negligence" by management; the collapse in April of an eight-story factory complex outside the capital city of Dhaka, killing more than 1,000, and a May 8 fire in a Dhaka sweater factory, resulting in eight deaths. Even more recently, at least 120 died in a June 3 fire at a poultry-processing plant in northeast China - again, allegedly, because the exits were blocked.

It seems that we haven't come very far from the worst years of the first industrial age. The only difference is that the recent tragedies took place outside the U.S.

But not, tellingly, outside the responsibility of American producers, retailers and consumers, whose relentless quest for low prices has prompted some overseas manufacturers to cut corners on safety and enforce miserable working conditions.

I'm certain that western CEOs are as horrified as anyone by the recent factory deaths. Nevertheless, they are presiding over broken supply chains, plagued by a lack of oversight and the need to deliver ever-increasing value to shareholders at any cost.

American and European consumers, meanwhile, continue to focus on the best bargains, paying only sporadic attention to the plight of workers who make the dirt-cheap merchandise, tens of thousands of miles away.

Ultimately, it's the consumer who must draw the line on working conditions around the world, even if that means paying a few cents more for the latest in dresses, hoodies or running shoes. Nothing motivates a manufacturer or retailer more than the threat of damage to the reputation of its carefully nurtured brand.

Which raises the question: Does anyone care? In fact, we're seeing a push by consumers, investors and business executives for more enlightened supply chains. But such efforts are, for the most part, far from unified and still in the early stages.

Boston Common Asset Management, LLC targets investments that promote sustainability and corporate social responsibility. Managing director Lauren Compere sees a growing awareness of workers' rights.

"There's been a whole round of engagements and initiatives that have involved the concept of traceability and transparency in the supply chain," she says, citing such issues as the Dodd-Frank Wall Street Reform and Consumer Protection Act, conflict-minerals mining in the Democratic Republic of the Congo, and the use of child labor to harvest cotton in Uzbekistan.

Compere says apparel manufacturers have made progress toward determining the source of their raw materials and products throughout the supply chain. At the same time, they are "coming together as an industry" on the issue of worker safety in factories.

The Rana Plaza factory collapse in Bangladesh last April prompted some of the world's largest apparel retailers and producers to commit to a binding accord on fire and safety codes. Signatories included H&M; Inditex, which owns the fashion retailer Zara; the Netherlands' C&A; the U.K.'s Primark and Tesco; PVH, parent company of Calvin Klein and Tommy Hilfiger; France's Carrefour; and Germany's Tchibo.

Spearheaded by the global union IndustriALL, the agreement mandates strict, regular safety inspections and bars participants from doing business with any factories that don't uphold the prescribed safety standards. Related efforts include the Ethical Trading Initiative, a U.K.-based alliance of companies, unions and NGOs to support human rights and improve global working conditions, and a recent call by 123 investor groups for "zero-tolerance policies on global supply-chain abuses," in a statement issued by the Interfaith Center on Corporate Responsibility.

Fair enough - except that the tragedies keep happening, notwithstanding companies' vows to tighten up on labor and safety standards around the world.

Compere acknowledges that the system as it stands is broken, to the extent that it allows for lax if not criminally negligent management at the factory level. She notes that some companies have expressed surprise that their products were being made at the affected Bangladeshi factories. "It means that companies like Walmart are still not fully understanding [the scope] of their global supply chains." (Walmart, too, has vowed to enact new safety measures at its factories in Bangladesh, but has declined to join the IndustriALL accord. Along with Gap Inc., it is reported to be offering an alternative agreement that would be self-policing and limit retailers' liability in the event of any safety violations by overseas factories. Score one for the lawyers.)

Laudable though they might be, efforts to ensure worker safety up to now have consisted of "a piecemeal patchwork system," addressing the issue on a country-by-country basis, says the Reverend Seamus Finn, who serves as director of faith-consistent investing for the Missionary Oblates of Mary Immaculate. What's needed is a coherent, worldwide push that doesn't merely respond to the latest tragedy, only to see public outrage evaporate within a matter of weeks.

Finn suggests that consumers are beginning to wake up to the reality of conditions inside factories that produce cheap apparel and other types of products. Plenty of investors and organizations have spoken out on the issue, he says. "My worry is that the consumer hasn't been heard very much on this."

The sheer of number and scale of recent incidents could be causing this sorry state of affairs to change at last. "This seems to me to have caught a wave," he says. "I'm hopeful that it's going to push things further along than previously."

Global supply chains, we're told, are customer driven. When it comes to working conditions in offshore factories, will customers drive them in the right direction?

Comment on This Article


Keywords: supply chain, supply chain management, international trade, conflict minerals, supply chain planning, sourcing solutions, supply chain risk management, Bangladesh factory fires

Not a chance. Recall the headlines of just the last few months. Three separate disasters in Bangladesh garment factories alone: the November, 2012 fire in Tazreen, where 112 people died due to "gross negligence" by management; the collapse in April of an eight-story factory complex outside the capital city of Dhaka, killing more than 1,000, and a May 8 fire in a Dhaka sweater factory, resulting in eight deaths. Even more recently, at least 120 died in a June 3 fire at a poultry-processing plant in northeast China - again, allegedly, because the exits were blocked.

It seems that we haven't come very far from the worst years of the first industrial age. The only difference is that the recent tragedies took place outside the U.S.

But not, tellingly, outside the responsibility of American producers, retailers and consumers, whose relentless quest for low prices has prompted some overseas manufacturers to cut corners on safety and enforce miserable working conditions.

I'm certain that western CEOs are as horrified as anyone by the recent factory deaths. Nevertheless, they are presiding over broken supply chains, plagued by a lack of oversight and the need to deliver ever-increasing value to shareholders at any cost.

American and European consumers, meanwhile, continue to focus on the best bargains, paying only sporadic attention to the plight of workers who make the dirt-cheap merchandise, tens of thousands of miles away.

Ultimately, it's the consumer who must draw the line on working conditions around the world, even if that means paying a few cents more for the latest in dresses, hoodies or running shoes. Nothing motivates a manufacturer or retailer more than the threat of damage to the reputation of its carefully nurtured brand.

Which raises the question: Does anyone care? In fact, we're seeing a push by consumers, investors and business executives for more enlightened supply chains. But such efforts are, for the most part, far from unified and still in the early stages.

Boston Common Asset Management, LLC targets investments that promote sustainability and corporate social responsibility. Managing director Lauren Compere sees a growing awareness of workers' rights.

"There's been a whole round of engagements and initiatives that have involved the concept of traceability and transparency in the supply chain," she says, citing such issues as the Dodd-Frank Wall Street Reform and Consumer Protection Act, conflict-minerals mining in the Democratic Republic of the Congo, and the use of child labor to harvest cotton in Uzbekistan.

Compere says apparel manufacturers have made progress toward determining the source of their raw materials and products throughout the supply chain. At the same time, they are "coming together as an industry" on the issue of worker safety in factories.

The Rana Plaza factory collapse in Bangladesh last April prompted some of the world's largest apparel retailers and producers to commit to a binding accord on fire and safety codes. Signatories included H&M; Inditex, which owns the fashion retailer Zara; the Netherlands' C&A; the U.K.'s Primark and Tesco; PVH, parent company of Calvin Klein and Tommy Hilfiger; France's Carrefour; and Germany's Tchibo.

Spearheaded by the global union IndustriALL, the agreement mandates strict, regular safety inspections and bars participants from doing business with any factories that don't uphold the prescribed safety standards. Related efforts include the Ethical Trading Initiative, a U.K.-based alliance of companies, unions and NGOs to support human rights and improve global working conditions, and a recent call by 123 investor groups for "zero-tolerance policies on global supply-chain abuses," in a statement issued by the Interfaith Center on Corporate Responsibility.

Fair enough - except that the tragedies keep happening, notwithstanding companies' vows to tighten up on labor and safety standards around the world.

Compere acknowledges that the system as it stands is broken, to the extent that it allows for lax if not criminally negligent management at the factory level. She notes that some companies have expressed surprise that their products were being made at the affected Bangladeshi factories. "It means that companies like Walmart are still not fully understanding [the scope] of their global supply chains." (Walmart, too, has vowed to enact new safety measures at its factories in Bangladesh, but has declined to join the IndustriALL accord. Along with Gap Inc., it is reported to be offering an alternative agreement that would be self-policing and limit retailers' liability in the event of any safety violations by overseas factories. Score one for the lawyers.)

Laudable though they might be, efforts to ensure worker safety up to now have consisted of "a piecemeal patchwork system," addressing the issue on a country-by-country basis, says the Reverend Seamus Finn, who serves as director of faith-consistent investing for the Missionary Oblates of Mary Immaculate. What's needed is a coherent, worldwide push that doesn't merely respond to the latest tragedy, only to see public outrage evaporate within a matter of weeks.

Finn suggests that consumers are beginning to wake up to the reality of conditions inside factories that produce cheap apparel and other types of products. Plenty of investors and organizations have spoken out on the issue, he says. "My worry is that the consumer hasn't been heard very much on this."

The sheer of number and scale of recent incidents could be causing this sorry state of affairs to change at last. "This seems to me to have caught a wave," he says. "I'm hopeful that it's going to push things further along than previously."

Global supply chains, we're told, are customer driven. When it comes to working conditions in offshore factories, will customers drive them in the right direction?

Comment on This Article


Keywords: supply chain, supply chain management, international trade, conflict minerals, supply chain planning, sourcing solutions, supply chain risk management, Bangladesh factory fires

Who Cares About Conditions in Overseas Factories?