Can new supply chain approaches prevent another Rana Plaza? | The Guardian

Tougher factory and supply chain standards won’t be enough to prevent disasters like the Bangladesh factory collapse. Can development tactics succeed where conventional approaches have failed?

Foxconn factory workers in China's Guangdong province

Foxconn workers in a Chinese factory. Can new industry tactics prevent supply chain disasters? Photograph: Bobby Yip/Reuters

Ideally, tragedy begets reform.

That’s the tale we’ve learned from past industrial disasters, including the 1911 inferno at the Triangle Shirtwaist Co. in Manhattan, which killed 146 and marked the dawn of a fundamental shift in US workplace standards.

The changes took decades, to be sure, but the tragedy spurred the development of fire and building regulations, the creation of labor and women’s unions and a culture of real regulatory enforcement.

What, then, do we to make of reactions to the collapse of the Rana Plaza factory six months ago?

The deaths of some 1,130 garment workers in the Dhaka, Bangladesh, sweatshops drew a storm of public outcry. But in supply-chain circles, the tragedy has revealed more about the limits of our potential to “fix” global supply chains that, in some cases, have grown too big and too complex to avoid human-rights failures.

Facing this reality, a new generation of supply-chain experiments are borrowing tactics from conventional development efforts. These look beyond conventional rules- and business-transaction based approaches to address the root causes of many factory malpractices. In general, they’re working to improve education, health and community conditions in ways that benefit both workers and their employers.

Initial Rana reaction

When Rana Plaza collapsed, the response – among top-tier corporate brands – was rapid. Within a month, a cadre of mostly European fashionchains, including H&M, Zara, C&A, Tesco and Primark, signed a legally binding agreement to help fund and enforce safety improvements in Bangladeshi factories.

US and Canadian retailers took a different path.

Under the umbrella of the National Retail Federation (NRF), key brands backed an alternate agreement reaffirming ongoing efforts to take a ground-up approach, training workers, factory owners, officials and foreign brands in parallel.

The split response led to an unseemly tit-for-tat round of criticism.

The heads of IndustriALL, a global union supporting the European effort, called the rival plan a “pale imitation.” The NRF effort also drew criticism for not requiring its suppliers to allow workers to organize.

The head of the NRF volleyed back, in The Wall Street Journal: “The IndustriALL plan seeks major funding by private business without providing accountability for how funds are spent, as well as binding retailers to specific resourcing requirements without taking into account the impracticality of such a requirement.”

Distracting as it is, the infighting reveals the spectrum of current possibilities – from the EU’s conventional approach to NRF’s ground-up agenda – and many of the limits that circumscribe supply chain efforts circa 2013.

Limits of good intentions

However earnest, corporate efforts to improve supply chain operations have not kept pace with the compounding complexity of globalized supply chains. Links have grown too numerous; buyers’ influence dissipates too rapidly.

Eric Olson, BSR’s senior vice president, walked me through the vexing math facing would-be supply-chain trackers. A typical Fortune 500 company will have hundreds or thousands of first-tier suppliers. But supply chains can easily extend to 15 layers or more.

“There’s almost no company on the planet that has figured out how to cascade their supply chain efforts into the second tier,” Olson said, “let alone the third, fourth and so on, even though 80% of the impacts are happening further out in the chain.”

Meanwhile, a recent survey of some 1,700 UN Global Compact corporate members highlights another limitation. While most companies set goals for their suppliers, only 18% actually help their suppliers set and review goals their own goals – and only 9% take steps to verify the efforts, according to Global Corporate Sustainability Report 2013.

“While companies are making progress in terms of thinking about supplier sustainability and setting expectations, the supporting actions that will drive adherence have shown little or no increase over the past few years,” according to the report.

Wider scope, deeper reach

If conventional supply chain practices are running up against inherent limits, what next?

In some of the world’s least-developed markets, a new generation of more holistic experiments is showing promise.

These experiments stem from the recognition that mandating standards to a factory manager often ignores developing-world realities, such as poorly educated workers, degraded public health, economic insecurity and antagonistic worker-manager dynamics.

If these factors can be improved, the potential to advance more ethical, productive factory ecosystems would rise overall.

As an example, Olson points to HERProject. The program, acollaboration between BSR and 22 multinational companies, is delivering curricula focused on health and financial topics to some 200,000 women workers in 200 factories and farms in Asia and Africa.

Early findings show that when offered to women through their workplaces, the factories benefit via reduced absenteeism and turnover. Greater work-place trust, in turn, is helping managers collaborate with workers on setting conditions. A Levi Strauss & Co. supplier in Egypt reported a four-fold return from the program

There’s no denying this approach is more difficult. Yet it’s clear that, if supply networks continue to stretch and globalize, conventional supply-chain tactics are ill-suited to less developed markets.

If high street brands can cultivate common cause with development goals, a smarter approach to supply chain management will be a welcome byproduct.