If you were in charge of prioritizing and then solving supply chain abuses, what would you do first and why?
By Kelly Eisenhardt
In this interview I talk with Arche Advisers CEO Greg Gardner about what he sees on the front lines in Bangladesh. Corruption is high, aligning stakeholders and reporting standards are a challenge, and moving to suppliers in other countries is a large-scale challenge. In fact, Gardner says that it will take several generations before Bangladeshis have all that they need to equal the conditions of workers in the Western world.
What are some of the biggest problems you are finding while auditing factories in Bangladesh?
When I first started doing CSR audits in Bangladesh in 1997, we found child labor, poor working conditions and excessive working hours. There was immense risk to a brand because children were producing their products or workers were not being paid correctly for working excessive hours.
Today that risk remains, but with the recent fires and Rana Plaza, there is a new risk. Brands learn that people are dying producing their products. There are serious fire safety issues. Many times we’ve seen blocked/locked exits, inadequate fire-fighting equipment, fire hoses with no water and no grievance system for the workers to address their concerns. Just ask your factories to conduct an unannounced fire drill. The results we are seeing range from nonfunctional to dangerous.
We have also seen bonded/forced labor and underage workers in these environments but now clients are asking if we can tell if a factory is going to fall or burn down. In the past, the structural safety of the building was not part of the audit process. This is a huge shift in CSR auditing.
Tazreen Changed Awareness
Tazreen was the tipping point. It piqued the interest or outrage of consumers and stayed in mainstream media, like New York Times, Wall Street Journal and social media sites, for a long time. As a result, Walmart’s January 22, 2013 letter to its suppliers really raised the bar for garment manufacturers in Bangladesh. Other companies started looking at their supplier lists to consolidate and reduce their footprint here.
There are fires on a regular basis in our industry. The loss of life and damage of property is terrible. There have been two major factory collapses in the last 10 years in Bangladesh, out of 5,000 garment factories. Statistically, the risk of a fire at a factory is much greater than a building collapse, but now brands want to check the building as well.
Enforce The Law on Fire Safety
If you were in charge of prioritizing and then solving those problems, what would you do first and why?
It’s simple. Enforce the law. Everything is in place for fire safety and many of the building safety standards. The government of Bangladesh can choose to enforce the laws. If not, it likely will stay this way for the foreseeable future.
With such a large population, people seem to be considered “replaceable.” If someone gets fired for standing up for herself, she is quickly and easily replaced. For many workers losing their job is less of an option than losing their life. Fear and exploitation are why so many of the workers did not evacuate Tazreen when the fire started and why workers came back to Rana Plaza the day after the cracks were discovered.
I would start with fire safety. The risk of fire is exponentially greater than a building collapse. Training, fire drills and inspections. There are several good fire-safety training programs in Bangladesh. Anyone can conduct a fire drill. Inspections help keep everyone honest and prepared. These things do not have to cost a lot of money nor do they require a big investment of time.
However, what everyone is asking for is structural safety inspections of the buildings. Soil tests. Building materials tests. Infrared and ultrasound scanning equipment. This type of inspection will let you know if the building will stay up or fall down, but the price of these structural integrity inspections is about $0.35/square foot (about $20,000 to $30,000 per factory). These inspections allow brands to determine what buildings are OK, which ones to retrofit and which ones they should walk away from. This takes more time and money.
The Audit Process
As an auditor, you know an audit is only as good as the questions it asks and the quality of the data collected. Is there something that needs to be changed about the audit process?
There are five parts to a good CSR auditing program. Getting a qualified auditor, having an accurate scope of work, completing the audit, documenting the audit in the report and using the audit results to make improvements.
Sounds simple but a lot can affect the final write up. Auditors need to be trained/qualified and have the right skills for the audit they have been given. You wouldn’t necessarily ask a quality inspector to conduct a social compliance audit. That auditor has to be observant – understanding what he/she sees, knowing what to gather and look for, as well as how to document it thoroughly.
It’s also important that the client has given the auditor the right scope of work. Clients have to be specific about the types of audits and what information they need. A big area of concern is whether or not a client wants a checklist completed or if they want to give the auditor the flexibility to follow an audit trail after a new risk is discovered.
For example, what happens if you find out a manager has been hitting people? Does the client prefer you finish the checklist so the report is complete? Or would they prefer that finding be investigated further, even if it meant not completing another part of the audit due to time constraints?
CSR Auditing Is Forensic Auditing
CSR auditing is forensic auditing. Many times, we are lied to and provided fraudulent documentation. In the course of due diligence, the discrepancies come to light.
For example, if a factory’s loading dock manager and timecards show the business is closed on weekends, but the shipping and receiving records show the business received a shipment on Saturday, who was working?
At times there are codes of conduct or payroll issues where people are not being compensated correctly. What do we do with that information after the audit? What does the client want to do with it? Do they have internal people to work on the problem to fix it? It is completely possible to have a great auditor, do a great audit and write a great report, and then have nothing happen with the results.
How would you describe the level of corruption in Bangladesh? Does it impact your audit process? Does it affect the level of safety in the factories?
Bangladesh consistently ranks low on its annual Corruption Perceptions Index. Many people believe the owners and managers involved in the recent fires and at Rana Plaza will be able to bribe their way out of prosecution. Ghush is a way of life in Bangladesh: white money, black money. It is one of the challenges about doing business in this part of the world.
Bribing auditors is quite common, especially when they realize you found something that could get them a bad score on the audit. Ethics is a global challenge. We have to hire people who will not accept bribes. The CSR monitoring industry is meant to support ethical sourcing, but it exists because of a lack of ethics in global supply chains.
Good Vs. Bad Factories, Not Countries
On a scale of 1-10, 10 being insurmountable, how would you rate the level of problems related to retail manufacturing in Bangladesh? Could this change or will we see mass exodus to other nations like Myanmar?
There are no "good" or "bad" countries, just "good factories" and "bad factories." Some of the worst factories I have visited (out of over 2,000 in 80+ countries in 18 years) have been in Los Angeles and New York City. Some of the best factories have been in China and other developing countries, including Bangladesh. So the rating varies more by individual factory then by country.
Companies manufacturing in Bangladesh don’t really have any other place else to go. It is difficult to move production sites quickly and the labor force here is plentiful and low-cost. They can send some production to Southeast Asia, Latin America or Africa, but they can’t move out of all of their Bangladesh factories just because of the headlines.
Also, brands are wary of going into new countries that often lack infrastructure, be it physical (ports, roads, etc.) or legal (trademark protection, etc.). Africa hasn't been very successful in apparel production, for example, because of lack of infrastructure. Bangladesh may be the big problem currently, as China has been in the past, but it is a “known” problem.
Other countries can absorb the increased production but companies will need to assess compliance levels in new supply chains. Some of the countries wanting to take on the work from Bangladesh have problems of their own, including human rights violations ranging from human trafficking to forced labor.
Positive Reform Underway
We see increases in audit requests throughout Southeast Asia, Brazil and Africa. We are also seeing new factories opening in Bangladesh with many suppliers hiring compliance professionals locally, training on fire safety and conducting structural integrity inspections.
Also, the Accord and the Alliance are just getting started. If the brands can work together through these, they can have tremendous impact in the next five years. Success will change a trend of failed initiatives.
Historically, challenges like these have taken a generation or more to solve. It was the late 1980s when Levi’s struggled with child labor issues in Bangladesh and pioneered its Terms of Engagement in 1991. Levi's top management was committed to the principles outlined in the Terms of Engagement long enough that they eventually became part of company culture, despite market ups and downs.
What we need to see in Bangladesh is for leadership to make commitments to similar principles consistently enough that they become part of the culture.
Without the leverage of multiple brands working together, it will take more than a generation to have sustainable, positive effects. Many of the next generation factory owners appear to be more open to change and CSR/sustainability in factories. They have been raised in a changing world and some are willing to make the investment. They understand the idea that they need to have some part in saving the world, or at least their corner of it.
Factory and Fire Safety in Bangladesh: Do Audits Help At All?
The Lesson of Rana Plaza For CSR: Worker Empowerment The Key To Safety?
From Triangle to Tazreen: A Century of Lessons