Supply chain responsibility in a global economy

A compelling debate raged in my international marketing class this past week: lines were drawn in the sand concerning the responsibility of global brands in the Rana Plaza travesty in Bangladesh.  One student took the Milton Friedman route and stated emphatically that business is not liable – the responsibility rests with the Bangladeshi government.  The only purpose of a corporation is to make a profit within the prescribed rules and regulations.  If it plays within the rules, all is well.  The other side of the debate states that a company must be accountable for activity within its supply chain.  Action driven by consumers, demanded by big business and implemented, monitored and enforced through third-party audits has the best chance of survival.  Although supply chain reform is desirable to savvy consumers, the ethics of the situation must be separated from corporate PR-spin. 

Are corporations responsible for their supply chains?  It’s helpful to refer to Archie Carroll’s CSR pyramid in answering the complex question.  Each layer of the pyramid depends on the foundational layers for support.  At the bottom of the pyramid is the economic component: business must generate economic value by meeting the needs of customers and providing jobs.  Second to the bottom is the legal aspect.  Business must follow the rules, pay taxes and treat employees according to codified regulations established by law.  Both of these are requirements.  The ethical aspect is second from the top – treating suppliers fairly, doing what is right over and above the law – and expected by society.  The apex is the philanthropic component which includes raising awareness and funds for worthy causes.  Although this is not required or expected of a company, it is desired by the community.  The fair treatment of the supply chain (including workers and factory conditions abroad) certainly falls under the ethical imperative of Corporate Social Responsibility.  Pursuing safe working conditions in the supply chain is not only expected by society, but it’s the right thing to do.

The influence of big brands can foster positive change.  Galen Weston expressed remorse during a meeting with Loblaw shareholders to address the tragedy.  Joe Fresh clothing was manufactured at Rana Plaza.  Loblaw pledges to compensate the families of workers and implement directives to help avoid future calamities.  In a nation where only 6 of the approximately 20,000 buildings, according to New Age, created in the past 10 years had all the necessary approvals, it will be an enormous feat.

The situation in Bangladesh is complicated: factory owners hold public office, corruption is widespread and the garment industry accounts for 80% of the nation’s exports according to Ethical Corporation.  Although the wages are miserly and the situation has been described as Dickensian, the factories provide millions of jobs to women in Bangladesh who may otherwise be unemployed.  The fashion retailers must work within the Bangladeshi framework and demand ethical reform.  It’s not enough to passively review factory safety certificates and blindly accept audit results about the state of buildings.  Brutally honest dialogue must begin because lives depend on it.  It won’t be quick and easy.  But nothing worth doing ever is.