The Search is Over

Do the clothes on our backs leave blood on our hands? Hope has faded as the search for survivors came to an end some three weeks after a garment factory building in Savar, Bangladesh, collapsed on April 24, claiming more than 1,100 workers.

Some of the photographs that have emerged depict images that are at once horrific and beautiful. Probably the most indelible image is the one showing a man and a woman in a final embrace, with half their contorted bodies buried in rubble. The surreal tranquility on the man’s face seems to suggest a post-mortem deliverance from the hardship of labouring long hours in a sweatshop.

As the dust from the collapse begins to settle, international furor — spurred by moral outrage over corporate accountability — begins to stir. This workplace disaster not only resulted in a massive death toll, but also exposes the deplorable working conditions in many of these overseas factories producing garments for brand names, some of which are well-known in — and hail from — Canada.

CANADIAN TO CANADIAN

Following the collapse of Rana Plaza which houses a factory producing goods for as many as 30 international apparel brands — including a small number of Joe Fresh apparel items for Loblaws Inc. — Loblaws chairman Galen Weston says in a statement that he is “troubled that despite a clear commitment to the highest standards of ethical sourcing, our company can still be part of such an unspeakable tragedy.”

While several audits did not suggest a problem, their scope does not cover structural integrity. If they did, they might have discovered that several storeys were added onto the building illegally.

On April 29, Loblaws joined other retailers and the Retail Council of Canada in an urgent meeting of its Responsible Trade Committee to address the situation. It also engaged the federal government and several organizations, including activist group the Maquila Solidarity Network and international audit companies, to look for potential solutions.

The homegrown supermarket chain has offered compensation to the families of victims who worked for its supplier and signed the Accord on Fire and Building Safety in Bangladesh, a multi-stakeholder initiative that seeks to improve worker safety in the country’s garment industry. A new standard will also be developed to ensure that all of Loblaws’s control brand products are made in facilities that respect local construction and building codes.

“This decision reflects our company’s pledge to stay in Bangladesh and underscores our firm belief that active collaboration by retail and manufacturing industries, government and non-governmental organizations, is critical to driving effective and lasting change in Bangladesh,” Julija Hunter, vice-president of public relations with Loblaw Companies Limited, says from Toronto.

The company also pledged to put its own people on the ground in Bangladesh. “They will report directly to the company, Canadian to Canadian, reflecting Canadian values,” the statement adds.

In spite of these moves, worker rights groups such as the Canadian Labour Congress (CLC) are scathing in its criticism of the supermarket chain and Canada’s foreign trade policy. Ken Georgetti, president of the CLC, charges that Canada has chosen to promote a five-fold increase of merchandise imports from Bangladesh since 2005 — now valued at $1.6 billion per year — and has remained silent on previous labour violations in that country.

“There was no trade union in any of the four companies involved in the Bangladeshi factory,” Georgetti says. “They felt powerless to refuse company orders to re-enter the site after an initial evacuation, despite obvious signs of danger.”

NEVER AGAIN

While the incident may have served as a wake-up call for Loblaws to review and tighten the checks and balances in its supply chain, it has also highlighted the repercussions that global outsourcing can have on workplace safety, especially in countries that serve as popular sourcing destinations.

On May 16, several workers were killed when the ceiling of Wing Star shoe factory in Phnom Penh, Cambodia caved in. Less than a week later, an external structure at the Top World Factory in the Cambodian capital collapsed, injuring some 23 workers, notes information from Better Factories Cambodia, an independent assessor of factory conditions in the country.

If any good can possibly come out of incidents like these, it is the phenomenon called regulation by disaster, in which long term regulatory changes are brought about by the occurrence of horrific incidents. “My first thought was this might be one of those events,” says Dr. Kernaghan Webb, associate professor with the department of law and business at the Ted Rogers School of Management at Ryerson University in Toronto.

“As sad as the situation is in Bangladesh, it’s an eye-opener to the public,” says Jim Wright, national representative of the United Food and Commercial Workers union in Toronto. “The fact of the matter is if you are manufacturing something at a very reduced cost, something has to suffer.”

COUNTING PENNIES

To better understand why countries such as Bangladesh, China and India are global outsourcing hotspots, one needs to look at the push factors that make manufacturers look overseas for cost-efficient locations.

Bob Kirke, executive director of the Canadian Apparel Federation in Ottawa, says Canadian companies have a significant tariff advantage to source from Bangladesh. “The rate of duty on most clothing is 18 per cent and for Bangladesh, it is zero.”

Add on to that low labour costs and the pull factor becomes stronger. However, low wages is only half the story. “There are many other additional costs that you incur because if you are operating in Bangladesh, there will be delays,” Kirke says, citing interruptions in delivery and other operational challenges. “They don’t have electricity two days in a week and they can’t run their dye houses.”

Kevin Thomas, director of advocacy with the Maquila Solidarity Network in Toronto, is critical of this business model, commonly referred to as footloose production. “It’s the model in which a buyer feels they can pull production from one factory and move it to another overnight practically without any repercussions,” Thomas says, citing a lack of commitment to suppliers to ensure that they improve working conditions.

“That kind of instability, the precarious nature of orders in this business really creates problems for any kind of sustainable improvements,” Thomas charges. “And what it sets up is a system in which suppliers compete for orders by offering the lowest price, the fastest turnaround time and knowing that if they don’t, another supplier or another country for that matter will take up that business.”

Compounding the problem is the fact that many of the costs that these suppliers have are fixed. “They can’t change the cost of energy they are taking, they can’t change the cost of the textile, so what they do is drive down wages and cut corners on other issues like health and safety,” he argues.

Last November, a report by Clean Clothes Campaign, an alliance of organizations in 15 European countries that seeks to improve working conditions in the global garment and sportswear industries, described the safety record of the Bangladesh garment industry as “one of the worst in the world.”

Between 2006 and 2009, 414 garment workers were killed in at least 213 factory fires. In 2010, 79 workers perished in 21 separately recorded incidents, notes the report, Hazardous Workplace: Making the Bangladesh Garment Industry Safe.

Many of these factories are housed in
substandard buildings with poor emergency procedures, overcrowded workplaces and inadequate and blocked fire exits. Workers, the majority of which are young women who remain the lowest paid garment workers in the world, have been killed while producing clothing for brands and retailers in Europe and North America.

The rapid expansion of the industry has also led to the conversion of many buildings — built for other purposes — into factories, often without the required permits. Others, like Rana Plaza, have put up extra floors or increased machinery to levels beyond the safe capacity of the building, with many factories running round the clock to meet production targets.

“The establishment of factories or the conversions of other buildings into garment factories has often been done as quickly and as cheaply as possible, resulting in widespread safety problems including faulty electrical circuits, unstable buildings, inadequate escape routes and unsafe equipment,” the report concludes.

However hazardous many of these 4,000 garment factories might be, they provide a living for four million employees. The ready-made garment sector in Bangladesh has become the backbone of the country’s economy, exporting more than US$17 billion worth of clothing in 2011, notes the report by Clean Clothes Campaign.

For Kirke, the million-dollar question is how can this growth so critical to a developing country be sustained without compromising worker safety? “We don’t want to kill the goose that lays the golden eggs,” he says. “But no one has signed up for a situation where you would be subject to an industrial calamity. So where do you need to take action along that continuum?”

DOUBLE STANDARDS

That is a big question with no easy answer. It will require several fronts — from the local government, workers and industry to non-governmental organizations — to converge and form a system that promotes workplace safety.

Firstly, the incident in Bangladesh reveals the need to address the building integrity of suppliers’ production facilities, which had not been a significant part of safety codes or audit standards. Secondly, unaffiliated third-party organizations, such as independent consultants and worker groups, should be involved to point out non-compliance, procedural inadequacies or corruption that may be overlooked by a contract auditor or consultant. “That represents a whole other level of checks and balance,” Dr. Webb says.

Thirdly, improving transparency and accountability by establishing a requirement for disclosure ­— which can include publishing on the retailer’s website the name and location of its supplier factories, audit results and how well the company is meeting the required health and safety standards ­— is another measure. “When you combine all these things together with a properly functioning regulatory regime, this contributes to the creation of a healthy, robust ecosystem that leads to better conditions for health and safety,” Dr. Webb suggests. “And that I believe would create the sort of accountability and pressure that would ultimately lead to improvements on the factory floor.”

Thomas concurs. “You can bet that a company that is linked to a factory quite publicly will do its best to make sure their factories are safer. As long as it is hidden, invariably there are going to be problems.”

In most cases, there is no requirement for companies to publicize their audit results. Nor does an established standard for auditors exist. “The quality of audits varies considerably,” Thomas suggests. “One problem that has clearly been identified about audits is that they are often either faked or bribed.”

A case in point is the deadly fire that broke out in the Ali Enterprises garment factory in Karachi, Pakistan on September 11, 2012, which claimed an estimated 300 workers. Just a month before the blaze, RINA — a global certification body based in Genova, Italy — issued an SA8000 certification to the very same factory. SA8000 is an auditable certification standard that measures social compliance in workplaces across all industrial sectors.

Social Accountability Accreditation Services (SAAS), a New York City-based accreditation agency that oversees the certification aspects of the SA8000 system, investigated the circumstances surrounding the certification of Ali Enterprises. In December of 2012, it was announced that a guidance document was being reviewed and would include consultations with multi-stakeholders.

Thomas cites independence as a key challenge to ensuring the integrity of auditing practices. “The money that they [auditors] make comes from the company and so, there is a certain incentive not to rock the boat too much,” he suggests. “So you need workers to be able to speak out freely to correct problems on a day-to-day basis.”

But before workers can point out safety violations on the factory floor, they must first be given a voice and freedom of association to organize and bargain collectively, Thomas stresses. This is why he regards the Accord on Fire and Building Safety in Bangladesh, which has already netted more than 40 signatories from major retail companies as of the end of May, as a major step forward.

“It brings together a whole range of buyers so that each one of them on its own may not have the power to compel factories to improve standards but together, they represent a significant force both within factories and within Bangladesh,” Thomas notes.

While no retailer should work in a silo, Adriana Villasenor, senior adviser with J.C. Williams Group in Toronto, thinks that a firm’s public image is the strongest incentive to prevent workplace accidents in vendor facilities. “All retailers are interested in having a good image and this kind of thing obviously hurt the image of retailers.”

THE RIGHT PRICE

“We underestimate the kind of power sometimes that these companies have when they go into a country like Bangladesh,” Thomas says. “If they represent such a huge part of that country’s exports, they have substantial power to make change. And I think where they have power, they have a responsibility to use it in a right way.”

But Kirke cautions against prescribing a one-size-fits-all approach to remedying the oh&s challenges created by global outsourcing. Of the 150 companies in Canada that import from Bangladesh, many are smaller firms with a net worth of five to $10 million.

“They have almost no influence over the factories in which they produce their goods,” Kirke contends. “If you ask a small company to do what H&M is doing, they won’t source in Bangladesh at all. They will just go to Cambodia or somewhere else.”

While the bigger companies may have the clout to dictate terms to their suppliers and publicize details about them, many smaller importers will have a real problem if required to live up to the same level of transparency.

Rather, companies should take incremental steps — whether on oh&s matters or other management oversight issues — and do it in a way that supports the production rather than undermine it. Retailers would also be well-advised to look at the bigger picture and encourage major brands and retailers to take health and safety considerations into account when pricing their goods.

“They can’t keep bouncing around from factory to factory looking for the lowest cost,” Kirke says, adding that retailers should not expect their vendors to install new fire escapes and reinforce structural columns if they are not prepared to pay more. “You need to do both sides,” he notes.

The race to the bottom is not a sustainable model but one that will create more workplace safety problems in the long run. Thomas
recommends that global buyers manage their production and commit to working with medium-grade factories that meet international standards. That also means paying a right price so that suppliers do not have to cut corners on things like wages or worker safety.

“If a company has not adjusted its purchasing practices and not taking into account how they might impact worker rights at the shop floor level, then they are going to be responsible for what happens next,” Thomas cautions.

PERKS AND PITFALLS

The saying that the grass is always greener on the other side holds water not only in life, but also in business. In the search for competitive advantage, many companies have turned to developing countries that offer a lower cost of production or service delivery, in addition to other factors such as availability of resources, accessibility to target markets, the quality of work provided by the vendor, local regulations and culture.

Perks aside, the stumbling blocks of operating in a foreign, albeit cost-efficient environment, are numerous. Take as an example Loblaws, which was thrown into a reel by the workplace calamity in Bangladesh — even though the workers at Rana Plaza are not technically employed by the company.

The supermarket chain indicates that it has vendor standards which spell out the standard requirements to ensure that products are manufactured in a socially responsible way.

Audits are conducted on a regular basis and Loblaws reports that it only works with those companies that pass the audits and commit to correction action plans addressing those concerns.

“Since the inception of the Joe Fresh brand, we have worked tirelessly to ensure that we adhere to a high standard of social compliance and workplace policies whenever sourcing our products,” Hunter of Loblaws says.

“However, like the industry at-large, those measures did not include testing the integrity of the building structure. Specific to Rana Plaza, the factory was one of many tenants inside the building complex and we understood that all of our manufacturing was done in a safe environment,” she adds.

A statement in April from Worldwide Responsible Accredited Production (WRAP), a not-for-profit organization promoting ethical and lawful practices in manufacturing facilities around the world, revealed that none of the five factories in Rana Plaza were certified by WRAP.

One of the factories, New Wave Style Ltd., had been certified, but their first certificate expired in 2007 and was not renewed until 2011. An unannounced audit and follow-up conducted at the facility by a WRAP auditor last March found that the facility failed to maintain compliant practices. Their certification expired in October of 2012 and was not renewed as the factory failed to appropriately address the issues.

The obstacles to enforcing oh&s standards in vendor facilities overseas lies not only in the geographical distance, but also the lack of a health and safety law that applies to foreign jurisdictions. While companies like Loblaws do not have direct legal liability for what happened to their supplier factories in Bangladesh, it is nevertheless difficult for them to evade moral responsibility, says Norm Keith, a lawyer with Fasken Martineau, DuMoulin LLP in Toronto. “The big concern is really are they treating those workers as if they were their neighbours or ignoring them if they don’t directly employ them in a contract in a different country with lower standards? Are they satisfied with their conscience?”

That sense of camaraderie with overseas workers producing goods for brands like Joe Fresh is aptly described in a statement in May by Wayne Hanley, national president of Canada’s largest private sector union. “The products made by workers in the Rana Plaza were handled by United Food and Commercial Workers Canada members every day and we feel an especially strong connection to these workers and their families.” Thousands of the union’s members work at Loblaws selling many products, including Joe Fresh items which were once made at the now-defunct factory, the statement adds.

LEGAL LIABILITY

Moral responsibility aside, Keith also points to the Corruption of Foreign Public Officials Act (CFPOA) as something that companies operating overseas should keep in mind. Under the Act, bribing foreign public officials to gain a commercial advantage is an indictable offence that can carry a jail term of up to five years. Using the recent incident in Bangladesh as an example, Keith explains the CFPOA means that Canadian companies and individual business leaders could be prosecuted in Canada if there is evidence to suggest that they knew or ought to have known that lower safety standards were used in another country and they were facilitated or allowed by a foreign public official who received some bribery advantage.

The penalties of violating the Act have become tougher with the passing of Bill S-14, An Act to Amend the Corruption of Foreign Public Officials Act, on March 26. A legislative summary dated May 28 from the Library of Parliament notes that the maximum custodial sentence for offences under the CFPOA will be raised from five to fourteen years.

Keith thinks the positive message coming out of the Rana Plaza collapse is that there is going to be more pressure for co-operation between countries to prevent similar occurrences. “There should be more international consensus on the importance of health and safety in the workplace,” he notes, stressing the need for an international convention that sets basic health and safety standards for workers. “Once you have got those in place, the local jurisdictions really need to enforce the laws. Beyond that, it is a foreign country.”

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Jean Lian is editor of OHS CANADA.