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OM in the News: Ethical Issues and Bengladesh’s Clothing Factories

July 13, 2013
Factory workers in Dhaka, bangladesh

Factory workers in Dhaka, Bangladesh

A group of 17 major North American retailers, including Wal-Mart, Gap, Target and Macy’s, just announced a plan to improve factory safety in Bangladesh, drawing immediate criticism from labor groups who complained that it was less stringent than an accord reached among European companies. The American plan, according to The New York Times (July 11, 2013), commits $42 million for worker safety, including inspections and an anonymous hot line for workers to report concerns about their factories, and more than $100 million in loans and other financing to help Bangladeshi factory owners correct safety problems. But unlike the accord joined mainly by European retailers, the plan lacks legally binding commitments to pay for those improvements.

Labor rights groups estimated that it would cost as much as $3 billion to bring Bangladesh’s garment factories up to an acceptable safety standard.  “Wal-Mart, Gap and the corporations that have chosen to join them, are unwilling to commit to a program under which they actually have to keep the promises they make to workers and accept financial responsibility for ensuring that their factories are made safe,” stated five of the groups. They faulted the plan for being “company-developed and company-controlled,” adding that “under the Gap/Wal-Mart scheme, brands and retailers are not obligated to pay one cent toward the renovation and repair of their factories in Bangladesh.”

The problems in Bangladesh’s garment industry have not affected the retail industry’s demand for cheap goods made there. Exports in June rose 16.3% to $2.7 billion, based on strong clothing sales. Bangladesh has quickly grown into the world’s 2nd largest apparel maker after China. But in a race to keep up with demand, many older buildings that lacked structural support were converted into factories, and building codes were ignored.

Discussion questions:

1. What is the responsibility of US and other firms that contract to have their products made in Bangladesh.

2. Are the critical labor rights groups correct in that US firms need to make stronger commitments to revamping the infrastructure?

One Comment leave one →
  1. July 18, 2013 8:43 pm

    This story could be a nice example for class of the importance of supply chain management. One could argue that retailers have no responsibility to worry about working conditions for products that they are re-selling. After all, the retailers themselves are not creating and managing the working conditions. They are simply purchasing products and then re-selling them to the public. However, public opinion tends to dismiss such arguments. Rightly or wrongly, consumers, activists, and the media often have an expectation that rich retailers bear a responsibility to ensure proper working conditions for plants manufacturing all the products that they sell. After all, some would argue, these firms attempt to charge consumers such low prices that their suppliers are under enormous pressure to cut costs. As such, the retailers should help out. So, just like a fast-food restaurant can be held responsible for disease-infested meat coming from a supplier’s plant, so too, at least with regard to public opinion, can a retailer be held responsible for activities at its suppliers’ facilities.

    Some of the Darden videos associated with the Heizer and Render text provide nice examples of how the restaurant chain travels around the world to educate suppliers and ensure that proper labor and food quality practices are followed.

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