June 29, 2015
I will start my discussion with background on the Retail Council of Canada and its role in efforts to improve factory and worker safety in Bangladesh. RCC is the trade association representing and advocating on behalf of the Canadian retail industry. RCC members include both Canadian and foreign-headquartered companies of all sizes and operating in all retail formats across Canada.
Many apparel retailers, including in Canada, source apparel in Bangladesh. All were impacted by the tragic Tazreen fire in November 2012 and collapse of the Rana complex in April 2013 even if they had no orders in those factories. Those tragedies demonstrated the breadth of the problem of structural and fire safety in Bangladeshi factories and the need for a rapid and coordinated response by retailers and brands sourcing in Bangladesh in concert with the Bangladeshi government, factory owners, and workers.
RCC and many of its larger members quickly mobilized with other retailers, consumer brands, and trade associations in North America, Europe, and Asia to address the problem, resulting in the Bangladesh Accord on Fire and Building Safety (Accord) and the Alliance for Bangladesh Worker Safety (Alliance).
RCC has members in both initiatives and sees itself playing a supporting role – assisting member companies taking a proactive role on the issue both individually and collectively, educating members on the issue and available options to facilitate informed decisions, encouraging collaboration between the Accord and Alliance, and serving as an industry spokesman on the issue at fora such as this conference.
The Alliance and the Accord have made remarkable progress over the last two years, completing factory inspections; implementing and sharing information on remediation; training workers and management on safety practices; establishing worker hot lines; and setting up financial systems to help fund factory corrective action plans, compensate victims and families, and support displaced workers.
The Alliance and Accord are nearly halfway through their respective five-year mandates. While significant progress has been made, much remains to be done. One major challenge is the volatile political situation in Bangladesh, which has seen a spate of street demonstrations and riots. We have heard no report that this situation has resulted in any significant supply-chain disruptions. Nonetheless, it has undermined Bangladesh’s supplier-brand reputation, and raised questions about the ability of the Bangladesh government to fulfil its responsibilities to implement reforms and enforce labour and safety laws.
I will next address possible misperceptions suggested by this panel’s topic – that, until consumers are willing to pay higher prices, no significant improvement can
be made on working conditions in supplier countries due to relentless pricing pressure on retailers and brands passed down their supply chains.
There is no question that, like other industries, retailers and brands experience significant price pressures, resulting from a keen competitive environment, rapid technological change, and consumer expectations. It is also evident that significant labour and safety issues remain as demonstrated by the recent factory fire in the Philippines.
However, the Alliance and Accord’s records, as well as demonstrable progress on a range of issues such as global declines in child labour, disprove the notion that little progress has been made on the CSR front. This progress has come in no small measure from companies and industries investing significant time and resources on these problems.
Retailers also recognized some time ago that it is not possible to pass compliance costs directly on to their customers by raising prices. Retailers and brands are not like governments, responsible for enforcing labour laws, and covering the costs of compliance is not like a tax assessment paid by consumers.
How often do we hear the argument that retailers and brands can help solve any number of social problems at a cost of “only pennies” to their customers. However, as retailers are called upon to deal with an ever-expanding list of CSR issues, these “pennies” soon become billions of dollars. Also, it is difficult to envision how a systemic shift of these costs to consumers would work without significant, across-the-board price increases requiring industry price collusion or government price-setting. So, the reality is that CSR costs are a burden companies, not consumers, will have to bear.
To the extent that companies and brands look for ways to offset the cost of their compliance programmes, it is not by increasing prices to their customers, but by looking for cost savings in other areas, such as supply chain management. Some companies believe a robust compliance programme enhances their brand reputation and competitiveness, and this competitive advantage more than offsets their costs.
So, I am not persuaded that forcing higher prices on consumers is viable nor is it even a necessary element for strong corporate commitment to social responsibility and effective CSR policies and action. However, the Alliance and Accord show how companies can do a better job at improving working conditions through collaboration with others in the industry, working with other stakeholder, and getting workers more involved in the process.
As a final point, the sourcing system we see today, with all its problems, is largely a legacy of the protectionist quota system when the availability of quota was the driving consideration on where to source. A consequence of this system was the inability to concentrate sourcing in a few locations and the spread of production to countries where it would otherwise have made little sense to build apparel factories. Ironically, the quota system was erected to protect domestic U.S. production, but without it countries like Bangladesh may never have been able to build a viable apparel sector.