Bangladesh fires reinforce need for supply chain transparency

Bangladesh fires reinforce need for supply chain transparency

The news of the recent factory fires in Bangladesh swept around the world, crudely exposing the human cost of cheap clothing and revealing a shocking lack of visibility within global apparel supply chains. Katharine Earley considers why Bangladesh has become a hotspot for cheap manufacturing, and speaks to sustainability experts Ilaria Pasquinelli of Texsture and Tom Smith of Sedex about how retailers can improve the transparency of their supply chains to prevent similar tragedies from re-occurring and protect their reputations.

More than 4,500 garment factories operate in Bangladesh, with clothing accounting for 80% of the country’s $24 billion annual exports, according to Reuters. It’s now the world’s biggest exporter of clothing after China, where rising wages and inflation have increased the cost of ‘cheap’ manufacturing, prompting suppliers to seek cheaper labour elsewhere. Workers are paid as little as $37 a month, and the burgeoning industry is marred by a seriously poor health and safety record.

Bangladeshi factories often operate in buildings with poor electrical wiring, few exits and minimal fire-fighting equipment. As a result, building fires have led to more than 600 deaths among garment workers in Bangladesh since 2005, says the advocacy group International Labor Rights Forum.

In the wake of the latest fires, numerous human rights and fair labour groups are pressing global brands to demand improved fire safety measures in Bangladeshi factories, publicly disclose the results of health and safety audits and take responsibility for factory fires. However, beyond this, finding a long-term solution ultimately means taking the harder, less travelled path of engaging positively with suppliers and building openness and transparency throughout the supply chain, our experts agree.

Labels in the ashes

Labels for brands including Walmart, Sears and Disney were found in the wreckage of Dhaka’s multi-storey Tasreen Fashions factory in November 2012, where flames tore through the building, killing 112 workers and leaving 150 injured.

The factory’s owner, Delowar Hossain, reportedly said that he doesn’t know and “doesn’t care” who the buyers are. “The local man is important,” Mr Hossain explained to the New York Times, revealing just how far removed these distant factories are from corporate buyers, both metaphorically and physically.

The second of the fires took place in Dhaka’s Smart Export Garments Ltd, a building with no fire extinguisher or fires safety equipment, causing the deaths of seven people. Labels belonging to Inditex were found in the ashes, according to the Institute for Global Labour and Human Rights (ILGHR), while the factory did not belong to an approved trade association and held no fire prevention or labour licences, reports Reuters.

Other labels allegedly found at the scene included French brands Sol’s, Scott and Fox and G Blog by Gemo, as well as the German low-cost brand KIK.

How are retailers responding?

Walmart is adopting a ‘zero tolerance’ policy on subcontracting without the company’s knowledge, with a list of factories not authorised to manufacture goods for the group set to be published. It will also require suppliers to station an employee in countries where they subcontract, rather than relying on third-party agents, reports The Telegraph.

Both Sears and Walmart say they have fired the suppliers responsible for subcontracting work to Tasreen Fashions. Sears states that its merchandise was being produced there without its approval. Meanwhile, the Walt Disney Co. asserts that none of its licensees have been permitted to make Disney-brand products at the factory for at least a year.

Inditex has ceased trading with Spanish supplier Wonnover and its Bangladeshi sub-contractor Centex following the tragic Smart Export factory fire in January, reports Bloomberg. Both companies deny contracting production work to unauthorised suppliers.

Are any retailers getting it right?

H&M, the global Swedish manufacturer, is not implicated in these latest scandals, and has in fact been educating workers in Bangladesh on their rights since 2008. The company wants to positively influence their situation through dialogue with their employers, it says. More than 440,000 Bangladeshi workers have been trained via H&M’s short films in the past five years, with topics covering leave and documentation, abuse and grievances, health and safety and overtime.

Similarly, Patagonia has introduced the ‘Footprint Chronicles’ to map out where in the world its suppliers are located, and chart the social and environmental impacts of its supply chain. The company audited more than 90% of its suppliers at primary cut-and-sew facilities in 2010. It now also audits raw material suppliers (both fabrics and trim).

“Brands are increasingly collaborating when it comes to risk management in the supply chain, as they know that any scandal will affect the whole industry,” says Ilaria Pasquinelli, director of risk management and sustainability consultancy Texsture. “Take Nike, for instance, it has shared 39% of factory audits with other brands via the Fair Factory Clearinghouse. The Roadmap to Zero is another example of retailers joining forces to combat a common issue.”

Operating local supply chains can, in principle, help fashion businesses to increase supplier visibility, Pasquinelli believes: “M&S is working on a collection produced in the UK and has been working with Historic Futures since 2011 to achieve fully traceable supply chains.”

Multi-tier supply chain challenges

“The multi-tier supply chain is central to this debate,” says Tom Smith, Head of Marketing and Business Development, Sedex. “Retailers often have very little visibility of suppliers further down the supply chain, when, crucially, this is where the major issues tend to occur.”

Smith explains that the health and safety issues culminating in the recent tragic fires do not represent ‘new news’, a sentiment echoed by Pasquinelli’s colleague Pamela Ravasio, who describes supply chain transparency issues as ‘old wine in new bottles’. The fundamental point, Smith says, is that new ways should be adopted to deal with these existing problems, adding that fire safety is one of many pressing social issues to be addressed.

“There are some great projects in place to address issues such as working hours, wages and ethical labour,” Smith comments. “However, most processes are only skimming the surface in terms of creating a path to greater transparency.”

Retailers have less direct influence over their more ‘distant’ suppliers, with risk growing further down the chain, while supplier understanding of important health and safety issues dwindles.

Managing risk

“Tracing supply chains can be viewed as a risk management and avoidance exercise,” says Pasquinelli. “Identifying critical areas of risk and analysing their respective social and environmental implications is a good starting point, but it won’t necessarily prevent episodes like this from happening again.”

Pasquinelli and her colleague Pamela Ravasio recommend exploring risk management solutions such as time-based process mapping, specialist supply chain tracking systems, collaborating with other brands and using public or member supplier data exchange services, such as those available via Sedex.

Above and beyond risk analysis, both Pasquinelli and Smith agree that building positive relationships with suppliers is the best way to improve transparency in multi-tier supply chains.

Engaging positively with suppliers

“Policies aimed at preventing dubious sub-contracting are already in place,” Smith continues. “The key challenge here is – how do you apply such a policy effectively to a large global supply chain?”

More influence needs to be exerted further down the chain, Smith believes, with the active participation of Tier 1 suppliers. Retailers must adopt a partnership approach and engage collaboratively with their first tier, delegating responsibility for important health and safety issues.

“Empowering the supplier who holds the direct business relationship with a factory is vital,” Smith comments. “This can only be achieved with openness and trust. Retailers must build constructive, relationships with suppliers, rather than adopting a simple ‘pass/fail’ mentality whereby suppliers are punished for doing badly but not incentivised to improve.”

Time and resource

Where resources are tight, among cotton suppliers for instance, it’s important to be practical and hone in on the most pressing issues first, targeting hot spots for improvement, Smith explains. Capturing data and using it intelligently to educate suppliers is key, he believes.

“Retailers should be wary of the ‘quick fix’,” he comments. “Instead, they should raise awareness of the challenges among their Tier 1 suppliers, identify key areas of risk and dedicate resource accordingly. They must be in it for the long-term in order to make a difference and improve their suppliers’ behaviour.”

Positive signs

Sedex is receiving increasing interest from companies in all tiers of the supply chain. More than 27,000 suppliers and over 500 retailers, brands and agents worldwide now use Sedex to disclose and report on ethical information, with over 4,000 new members joining in 2011-12. This suggests that more companies are starting to see the health, sustainability and business benefits of educating their supply chain, Smith believes.

There’s no doubt that it requires time, patience and resource to fix the fundamental barriers to supply chain transparency, however, the long-term reward is worth it – in terms of improving social and environmental performance, managing risk, protecting reputation, boosting sales and avoiding major catastrophes. Importantly, this will all help to ensure that the workers who make our clothes enjoy a better quality of life.

This article was originally published on the Ethical Fashion Forum’s SOURCE Intelligence site.