Bangladesh and Ethical Supply Chains

On a Saturday evening last November, an overtime shift at the Tazreen Fashions wearing apparel factory in Dhaka, Bangladesh, was in full swing. Nearly 1,200 workers, mostly women, were packed side-by-side in crowded rooms laboring feverishly at their machines to complete private label orders for customers that include Wal-Mart and Sears.

The factory is typical of the more than 4,500 in Bangladesh that has gained the infamous title as the “low-cost production capital for Western brand clothing,” where the minimum wage is $37 a month and worker’s rights are practically nonexistent.

The Nov. 24, 2012, fire that eventually would level the nine-story factory started on the ground floor as one of its electrical generators, straining under the demand, short-circuited, spewing a shower of white-hot sparks in an open room piled with fabric.

By the time the first smoke was identified, it was already too late. Feeding on the ready quantities of material, yarn and completed garments, the flames grew and spread quickly. But in place of fire alarms and sprinklers, thick toxic smoke and panicked screams would be the only signal to the other workers of the approaching danger.

Frantic workers raced to smoke-filled staircases only to become trapped by locked exits, or were blocked from escape by iron grills on many of the windows. One employee, who survived only by leaping from a third-story window, recounted how she approached her supervisor upon first smelling the smoke, only to be told that nothing was wrong and that she was to return to her station. But when the smoke intensified and she and others attempted to flee, they found the doors padlocked closed. In the end, 112 perished.

Sadly, the Tazreen plant, which lacked a sprinkler system or outside fire escape, is typical of the notoriously poor working conditions found throughout Bangladeshi factories, where overcrowding and locked fire doors are reported to be common practices.

Factory owners complain that the costs necessary to improve these conditions would make the price of their goods vulnerable to foreign competitors. As a result, there is little government enforcement of safety laws because of how crucial the apparel industry has become to Bangladesh’s national economy. The country’s garment industry, second only to China’s in global apparel exports, reportedly constitutes about four-fifths of Bangladesh’s entire manufacturing exports, and employs more than 4 million workers. 

In the days following the fire, numerous reports cite, in particular, Wal-Mart’s alleged pre-existing knowledge of these conditions and of its refusal to promote any corrective action. The terms “ethical supply chain” and “moral supply chain” begin surfacing. Bloomberg and The New York Times report that Wal-Mart even shot down a plan proposed in 2011 under which major brands would have paid for the costs of safety improvements in the Bangladesh factories producing their goods.

Adding to Wal-Mart’s increasing public image woes, an article in Insurance Journal reports that Wal-Mart defended its position by stating that “it was unaware that its private label clothing was being made at the Tazreen Fashions factory, and that it had not authorized anyone to make its garments there.”

This statement raises troubling questions. How does any company, and particularly a Wal-Mart, not know where its goods are being produced? What about quality control and other related inspections? Had Wal-Mart not visited the original vendor where the outsourced production would have been notably missing? Would this not represent a failure of Wal-Mart’s own vendor auditing guidelines as stated within the company’s published “Ethical Standards Program?” And what about trade security?

For Wal-Mart to lose visibility of its supply chain and the parties that have physical access to its goods raises alarming questions with regard to the integrity of its shipments, especially as a charter participant in the Customs-Trade Partnership Against Terrorism initiative.

It will be interesting to see how Wal-Mart and other companies ultimately respond to this issue, as well as today’s consumers who are more globally and environmentally conscious, with social media providing a powerful tool in shaping perception. According to an article by Ethisphere, “75 percent of the average corporation’s value is now intangible with the most valuable asset being a company’s good name, brand, or reputation.”

This translates into a company’s social responsibility and ethical behavior holding even greater importance than the actual products it sells, especially when those products are branded as “cheap clothes made in sweatshops.”  

Jerry Peck is a licensed customs broker and Global Trade Management expert with more than 30 years experience in regulatory compliance and GTM optimization solutions. Contact him at 469-235-5229, or at wgpeck@global-trade-ms.com.

 

 

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