By Julie Fox Gorte, Ph.D., and Heather Smith, Pax World Investments
A rickety garment factory in Bangladesh collapses. Scores of garment workers, most of them women, are killed. Companies selling clothes manufactured at this and other contract garment factories demand action to improve worker safety. Under pressure, the Bangladeshi government agrees to take steps to improve safety, including an inspection program and multi-stakeholder oversight. It’s 2004. The factory is called Spectrum.
Fast forward to April 2013. Despite warnings surrounding its structural safety, the Rana Plaza factory collapses, killing over 1,100 people in Dhaka, Bangladesh.
Déjà vu, anyone?
There are thousands of unsafe garment factories globally. Their owners employ mostly young women, paying them appallingly low wages. For the women, these jobs are probably their best option to support themselves and their families. The factories are in Bangladesh, Thailand, Pakistan, Myanmar, China, Indonesia, Cambodia, India and other emerging and developing countries. Documented cases of work-related illness and deaths occur routinely every year at these factories.
Garment manufacture is one of the things that can be done in poor countries with few resources as a bootstrap to a more prosperous economy and a toehold on industrialization. It requires what one observer calls “little technology, cheap labour and little capital.” It is also, like any enterprise that relies primarily on cost-cutting for competitiveness, vulnerable to corner-cutting to keep costs low. It is no surprise that tragedies like the Spectrum and Rana Plaza collapses happen in Bangladesh, just as they did during the early industrialization phases in scores of other countries, including the United States. Recall the Triangle Shirtwaist Fire in New York in 1911, and how this tragedy led to public recognition of the poor safety standards in garment manufacture and legislation aimed at improving those standards.
There is no compelling reason to keep reliving this sad history. Making somebody’s T-shirt or jeans should not be a death-defying act for anyone. Similarly, safety also need not be a competitiveness-killer. Yes, the garment industry is a very low-margin business, and some studies have shown that while consumers often say they would pay more for ethically produced goods, they don’t always back up that sentiment with their actual purchases. One study, for example, documented that only one-quarter of shoppers paid for socks labeled “Good Working Conditions” with a 50 percent price premium. But we’re not really talking here about increasing the cost of living, or even of jeans, by 50 percent; improving safety in garment factories would likely add only a few percent to the price of a pair of jeans or a T-shirt. A few cents, even a few dimes is not too much to pay to assure that the women who comprise the majority of garment workers globally do not have to die in factory collapses or fires.
Companies’ various efforts to put together new safety initiatives—The Alliance for Bangladesh Worker Safety in the U.S., and the larger Accord on Fire and Building Safety in Bangladesh, primarily in Europe—are commendable. We greatly hope that they will succeed. But, if history is any guide, the success will be partial; some factories will be covered, but others won’t be. While there are safety regulations in Bangladesh, enforcement is often the victim of historically cozy relations between factory owners and politicians and a woeful lack of resources to implement the regulations even if there were no pressure to do otherwise. It is ironically noteworthy, for instance, that the U.S. government tried to exert some pressure to improve things in Bangladesh, suspending the country’s trade privileges as a demonstration of the Administration’s concern over labor rights and safety problems. Shortly thereafter, Bangladeshi lawmakers passed a new labor law, which was immediately assailed by workers’ rights groups as both too modest and containing provisions that undercut unions. Same old, same old. Without a concerted push on the part of the Bangladeshi government to truly improve safety, the changes made will be insufficient to address the scope of the problem.
One of the other motifs in the history of garment industry working conditions is gender. The vast majority of garment workers are female, and women tend to be paid less and less likely to be managers or owners than men. Women are therefore more likely to bear the brunt of safety problems and poor working conditions, and they should be involved in any initiative aimed at solving this problem. The British nonprofit War on Want recommends that any attempt to address garment-sector working conditions in Bangladesh should “[e]nsure maximum participation of women in all consultation bodies and review mechanisms, aiming for levels comparable to their representation in the garment sector itself.” Since deplorable working conditions, as well as death, are characteristics of the garment industry everywhere, it’s time to stop the whack-a-mole approach of focusing on one country, one factory, one incident and focus on the problem of safe working conditions everywhere. That is best done systemically and globally.
One excellent way that companies can show their commitment to doing this is by endorsing and implementing the Women’s Empowerment Principles, a set of practical guidelines for businesses and the private sector on how to empower women in the workplace, marketplace and community. The Principles, promulgated by the UN Women (UN Entity for Gender Equality and Women’s Empowerment) and the United Nations Global Compact in 2010, are designed to support companies in reviewing or establishing policies and practices to promote women’s empowerment. The seven Principles cover key elements ranging from workplace health and safety and professional development to supply chain and marketing practices that empower women. Implementation of the Principles is vital in creating an organizational environment that values women’s voices and participation, fostering more robust decision-making processes.
Nearly 600 companies have endorsed the Principles since their launch in 2010, including apparel retailers like Levi Strauss and & Co. Recently, Pax World, whose CEO was among the first to sign the Principles, launched an effort encouraging global apparel manufacturers and retailers to endorse and take steps to implement the Principles within their own operations and those of their suppliers. In its letter to the CEOs and women board members at more than 30 apparel manufacturers and retailers, Pax World outlined its view that the systemic approach provided in the framework of the Principles can facilitate the interactions and communication needed between key stakeholders, including women, to address the issues that continue to plague the garment industry. Such an inclusive approach will, in turn, lead to lasting solutions that improve the quality of life for women not just in Bangladesh, but for women all over the world.
Why do investors care? First, because investors can prod companies to take action and to save lives. Second, because they also can protect their investments. Today, company value can be attributed to intangibles such as reputation or goodwill as much as to its physical assets. Companies with intangible value must be highly sensitive to reputational risks that could diminish its brand or social license to operate. Today’s investors understand that if half a company’s value is intangible, a catastrophe that makes its customers unhappy can easily result in a loss of value that will ruin its investors’ entire day, and make it shark bait for someone looking for a cheap acquisition. A good reputation is immensely valuable, hard to build, and easy to lose. It seems silly to risk that, but in fact companies do it all the time.
Apparel retailers and manufacturers often have supply chains that are something like daisy chains, which means that they don’t always know where their clothes are actually being made. This can be quite embarrassing, and public embarrassment is always a brand risk. Want an example? After a 2011 fire at the Tazreen factory in Bangladesh killed 112 people, inspections showed that the workers had been sewing clothes for Walmart. Yet a Walmart spokesperson said that Tazreen had been removed from its list of authorized factories months earlier, and that the company had no knowledge that its clothes were still being made there. No company wants to make a headline this way.
We believe that companies making a formal, public commitment to aspire to and implement the Women’s Empowerment Principles will benefit from a more positive image and reputation, and be seen as better investments in the long run.
The best way to address the problems revealed in the latest garment industry tragedy is proactively, systematically, and globally. To avoid risking the lives and health of poor women in the garment industry across the globe, the Women’s Empowerment Principles offers a path forward to do just that.
[image credit: ILO Photos: Flickr cc]
Julie Fox Gorte, Ph.D., is senior vice president, Sustainable Investing, and Heather Smith is lead sustainability analyst at Pax World Investments.