- Category: Perspective
01 Dec 2013
- Written by John Quelch
In April more than 1,100 workers died in Bangladesh when a garment factory complex called Rana Plaza collapsed. There’s no dearth of candidates to share the blame for the accident. Building codes were inadequate, inspections were infrequent and the enforcement of the law was lax.
Moreover, Rana Plaza is the tip of an iceberg. Bangladesh’s $20-billion garment industry has expanded rapidly in the past 10 years primarily because of low labor costs. With almost 5,000 factories in the country—more than two dozen members of parliament are among the owners—and with corruption rampant, weak enforcement of the law is inevitable.
Contrary to popular perception, Western governments and international organizations can exert little influence on the Bangladeshi government or companies. World Trade Organization members cannot discriminate against each other, so no country can legally subject garment exports from Bangladesh to quotas or additional tariffs to ensure that the state enacts or enforces laws. The World Bank deflects all labor issues to the International Labor Organization (ILO), whose conventions focus primarily on the rights of labor to organize and to strike for better conditions. While the ILO has promoted workplace safety in recent times, its regular budget doesn’t support hiring on-the-ground inspectors, even if the Bangladeshi government would allow them to inspect factories and monitor the enforcement of safety regulations.
That leaves two forces that can improve workplace conditions: pressure by consumers of Bangladesh-made garments and the responsibility that companies placing orders on Bangladeshi factories may feel because of the efforts of consumers and employees.
Many major retail brands, such as Europe’s H&M and Zara and the US’s Wal-Mart and Gap Inc., source garments from Bangladeshi factories. To the surprise of many, these companies have stepped up to the challenge. More than 100 European companies have signed a legally binding accord that involves funding the inspection and upgrading of the 1,500-plus factories they use in Bangladesh. More than 25 American companies have signed a nonlegally binding agreement that will do much the same for another 620 factories, and they will offer factory owners up to $100 million in low-interest loans.
In addition, a re-energized ILO, with financial support from the UK and Dutch governments, has pledged more than $24 million to support inspections, training programs and improvements at roughly 2,500 high-risk factories.
Such collective action is essential. Bangladesh’s factory owners, who operate with tight margins in a highly competitive industry, find it tough to invest in improvements. In a globally integrated economy, Western multinationals have the ability to exert more influence as a force for good than do any other stakeholders.
John A. Quelch is a professor of business administration at Harvard Business School and holds a joint appointment at Harvard School of Public Health as a professor in health policy and management.