Profit Before People: Can we afford to ignore supply chain workers?

The quest for profit is the lifeblood of global commerce. Retailers and suppliers, like any organisation, are hungry, short-term cash seekers who must pay their costs, reward shareholders and fund the next marketing campaign to acquire more customers.

What’s left over – profit, long term and short term – is the single true marker of corporate success, and as we know, fashion brands and suppliers are equally guilty of doing almost anything to get it.

Those in the apparel industry know too well that profit is increasingly hard to come by. Labour costs in the Far East are rising and bargain basement clothing is ripping a hole in the fabric of the industry’s value. It may be worth £66 billion to the UK economy, but how thinly spread is this value across an unfathomable volume of low quality, low cost garments?

The Rana Plaza disaster made it very clear that garment workers are paying the true price of cheap fashion because of poorly monitored, convoluted supply chains, sub-par working conditions and gross employer mistreatment.

The conditions in which many, if not most, workers produce their goods are harsh – whether it is tea pickers in Sri Lanka, cotton pickers in India or garment workers in Bangladesh – and periodic scandals cause temporary embarrassment to Western retailers and their PR departments, but bring about little change on the ground.

Fashion brands expend huge amounts of time and money on understanding, attracting and retaining their customers, and suppliers fight to hang onto every extra penny passing through them, especially in a climate of unpredictable revenue stability.

Clothing and accessories brand, Monsoon, was accused of a ‘shameless’ squeeze on their supply chain, declaring a 4% deduction (or “discount” as they called it) in any invoices received, alongside an extension of payment terms. Its suppliers were naturally dismayed, and undoubtedly the workers will have to bear much of the burden.

The need and greed for survival and growth is so often at the expense of the ‘people’ side of the supply chain (is there any other side to an organisation?).

At the farthest end of the manufacturing process, garment workers are severely under-valued (not to mention underpaid) human capital in today’s global marketplace. How can we expect happy, productive workers if they are padlocked into their workplace and denied basic rights?

From the retailer’s point of view, the task of properly monitoring their suppliers and the conditions in which they work is practically impossible. Even the most conscientious can (and do) visit only a tiny proportion of worksites; otherwise their main or only avenue of information is through top-down management, where there is reason to believe that reports are often suspect.

The Karachi factory, in which a fire took the lives of 262 workers in October 2012, had passed an inspection mere months before the incident. If workers had been given the opportunity to point out the poor safety conditions, or similarly, the cracks in the Rana Plaza concrete before its collapse in April 2013, might these disasters have been prevented?

Harnessing the worker voice for positive impact

Harnessing the worker voice may have an even greater positive impact than preventing large-scale industrial accidents. The fashion industry has the power and potential to improve society, the environment and – motivationally – their own financial performance, by adopting “innovative models and proactive intervention” towards the farthest reaches of its operations.

Responsible Trade Worldwide (RTW) was formed with the specific aim to support organisations in achieving the balance of profitability and responsibility. By delivering transparency throughout the supply chain, the RTW assessment tool facilitates the gradual shift from worker compliance to engagement by directing a survey at factory and field workers and linking the responses to HR practices and working conditions for clear signposting of where improvements must be made.

“Most supplier responsibility programs are compliance-focused, with most of their resources consumed by conducting audits, correcting deficiencies, and following up,” Tim Mohin writes in his book Changing Business from the Inside Out.

Through better communication with the workers, retailers and suppliers can move beyond bureaucracy and blind alleys in the management of their operations towards effective monitoring of ethical standards, management of reputational risk and a real-time connection with the people who actually make their products.

Tragedies such as the Rana Plaza collapse only serve to highlight the importance of genuine engagement with workers to understand their specific challenges, needs and ambitions. Each and every one of these individuals are central to the achievement of transparency, compliance, productivity and profit, to the benefit of everyone.

The technology now exists to increase visibility of problems; identification of risks is the first step to measuring the risk and potential within the supply chain, and businesses have not only an opportunity, but a duty, to act.