BGF is pleased to introduce here the interview by Here & Now with John Quelch, professor of business administration at Harvard Business School, Co-Founder, and Member of Board of Directors of Boston Global Forum, about Ranza Plaza tragedy. The original version can be found at http://english.thesaigontimes.vn/Home/features/general/32153/The-power-of-bargain.html.
Bangladesh Garment Factories See Slow Recovery
In April, more than 1,100 people died when an eight-story building that housed garment factories in Bangladesh collapsed.
Since the tragedy at Rana Plaza, many promises have been made by the country’s government and international retailers alike, promising better safety for garment workers.
Here & Now’s Robin Young speaks to Harvard business professor John Quelch about the aftermath of the collapse.
ROBIN YOUNG, HOST:
It’s HERE AND NOW.
J.C. Penney, Macy’s, Hollister are all opening their doors tomorrow despite the holiday. One hopes the employees are OK with working on Thanksgiving. And while we’re thinking about American workers selling the products, how about the foreign workers making them? Look at your labels. Bangladesh is the world’s second largest clothing exporter behind China.
And we remember earlier this year that terrible factory collapse. More than 1,100 people killed when Rana Plaza crumbled. The tragedy shocked consumers and had many taking a closer look at their tags. But will you this holiday season? Clothing companies, countries, consumers all promised changes. What happened?
John Quelch is professor of business administration at Harvard Business School. He’s taken a close look in several recently released Harvard Business School case studies, and he joins us from the Harvard studios. Professor, start with retailers. You write that there was a pact, a safety accord following this collapse. What happened?
JOHN QUELCH: The magnitude of the tragedy resulted in considerable media coverage. A lot of retailers who source in Bangladesh, particularly lower price retailers, felt the pressure of the media and consumer opinion that they should take a closer look at the workplace safety conditions of the folks in the factories in Bangladesh, which – not owned by the retailers but which were integral to their supply chains.
So we had two agreements that were agreed upon. One was a group of a hundred mainly European retail brands who came together with a five-year legally binding agreement to maintain order levels in Bangladesh for at least two years, but to share the cost of factory upgrades in the 1,500 or so factories in which they manufacture their products. Secondly, there was a counterpart American agreement that included Wal-Mart, The Gap and other American retail brands that is known as the alliance.
That covers an additional 600 factories. Around about a quarter of the workers employed in the garment industry in Bangladesh work in those factories. But this was a non-legally binding agreement but with pretty much the same objectives of pulling up the wage levels in the factories as well as improving workplace safety conditions.
YOUNG: Well, and what is your sense that anything’s actually happening? I mean, we read this week that this Swedish brand, H&M, second largest retailer in the world, they pledged to pay a living wage to their more than 850,000 textile workers. Does that extend to Bangladesh? You know, what is your sense that these pledges, accords, agreements, are having an effect?
QUELCH: Robin, I think a lot more is happening than might have been expected. To have over a hundred retail brands, primarily European, come together in an alliance to commit for a five-year period to improve workplace safety and working conditions in Bangladesh, it’s very important. But it’s self-interest. These companies need the garment industry in Bangladesh.
They need workers who are healthy and committed and not on strike every other week for higher wages. They need to manage their subcontractors and contractors in those countries in order that the supply chain be efficient and in order to have a sustainable supply chain coming out of Bangladesh.
YOUNG: You’re saying it’s in their own better interest.
QUELCH: So it’s self-interest.
YOUNG: Yeah. Right. And we know that – previously we’ve spoken of this on this program. American and other countries outside of countries like Bangladesh would hire middle people, other companies to do the inspections. They claim those companies were failing. It sounds now like they’re going to step up and take more care with it.
But what about the Bangladeshi government? We know that many of the members of Bangladesh’s parliament were also factory owners, that in the case of the Rana Plaza there have been a huge crack, a loud crack everyone heard, and yet the management still made the workers stay inside the building. So what’s the sense that somebody’s going to be punished for what happened and that there’ll be less corruption and more oversight going forward?
QUELCH: Well, on the Bangladesh economic side, it’s important to note that the garment industry in Bangladesh is probably the most important export earner for the country. And it employs a staggering number of people, around about five million workers operating in around about 5,000 factories. The garment industry has developed very quickly over the last 10 years, principally on the basis of low cost. And as a result of the quick development of the industry, quite frankly, the standards that have been in place and the enforcement of those standards has been lax, leave aside the issue of corruption and payoffs to inspectors and so forth.
The fact of the matter is that whenever an industry grows that quickly, that substantially in an emerging economy, you’re inevitably going to run into oversight and enforcement problems. That’s a key problem.
YOUNG: Well – and in just the couple of minutes we have, what about consumers? Rana Plaza was said to change the behavior of Americans. They would look at labels. They would make demands. And has that happened? And also, you say that when it comes to what Americans can do, it’s not just a federal government problem. State governments can do things. So what do you mean by that?
QUELCH: Well, first of all, regarding consumers, what we don’t want to have happen is for consumers to boycott product that is made in Bangladesh. That will only rebound on the workers in the factories and put them out of work entirely. So the objective, really, has to be to improve the environment of workplace safety in Bangladesh. But more than that, we have to improve the entire worker rights environment in Bangladesh because workplace safety oversight issue is really just the tip of an iceberg that relates to basic worker rights, ability of unions to organize and so forth.
YOUNG: Well – and this is where you say states can come into play because they can pass legislation about where they get, for instance, their uniforms for their police officers, for prison inmates, for other state-funded textiles. They can make demands.
QUELCH: That’s right. There is no reason why customers, not necessarily boycotting Bangladesh but working to encourage and put further pressure on Bangladesh and the factory owners in Bangladesh, can help by specifying procurement standards that require certain workplace safety and worker rights standards to be met in order for those – for the products of those factories to qualify for procurement by state governments.
YOUNG: John Quelch, professor of business administration at Harvard Business School. They’ve just released some reports on the aftermath of the terrible collapse of the Rana Plaza factories in Bangladesh. Professor Quelch, thanks so much.
QUELCH: Thanks, Robin.
YOUNG: And you’re listening to HERE AND NOW. Transcript provided by NPR, Copyright NPR.