Tenth Anniversary of the Rana Plaza Disaster
Ten years ago, on April 24, 2013, the world was shocked by the collapse of the Rana Plaza building in Bangladesh. The tragedy claimed the lives of 1,134 garment workers and injured thousands more. The building housed several garment factories that supplied clothing to major global brands. Rana Plaza highlighted the dominant supply chain logic: that a T-shirt can only be sold at a very low price at the downstream end of the supply chain because the real cost is paid by the workers at the upstream end, who sacrifice their health or even their lives. In the aftermath, many apparel brands committed to improving working conditions in their supply chains. Yet, progress has been slow and uneven. Ten years on, there is still much to be done to ensure that garment workers are treated fairly and with dignity. As we remember the victims of the Rana Plaza tragedy, we, supply chain academics, have a crucial role to play in the transformation of fashion supply chains.
European Commission’s Directive on Corporate Sustainability Due Diligence
Yesterday, the European Commission adopted a long-awaited Proposal for a Directive on Corporate Sustainability Due Diligence. It aims to “set out a horizontal framework to foster the contribution of businesses operating in the single market to the respect of the human rights and environment in their own operations and through their value chains, by identifying, preventing, mitigating and accounting for their adverse human rights, and environmental impacts, and having adequate governance, management systems and measures in place to this end”. Importantly, the proposal covers the company’s own operations, their subsidiaries and their value chains (indirect and direct business relationships). It covers large companies (500 employees, €150 million net turnover worldwide) and additional companies operating in defined high impact sectors. I am sure many supply chain managers, not just in Europe, will have the 70-page document on their nightstand as required reading for the next few days.
Mapping the Cobalt Supply Chain
Cobalt has become a key commodity for battery-powered vehicles and other electronic products. The Democratic Republic of Congo is the largest producer of cobalt. The so-called “Copperbelt” in the southeastern part of the country hosts most of the cobalt ore, mainly extracted through large-scale industrial mining but also through artisanal and small-scale mining activities by more than 100,000 miners. The sector faces numerous sustainability challenges within local supply chains, such as child work and other human rights violations. The Federal Institute of Geosciences and Natural Resources from Germany has now published a report, titled Mapping of the Artisanal Copper-Cobalt Mining Sector in the Provinces of Haut-Katanga and Lualaba in the Democratic Republic of the Congo, which analyzes the cobalt supply chain in the Congo. The focus of the mapping lay on the beginning of the supply chain, i.e. from the cobalt ore to the first domestic sale of production, which is often overlooked by Western consumers and users.
The Worst Supply Chain in the World?
Is Cargill the worst company in the world? In their new report, titled Cargill: The Worst Company In the World, the environmental protection organization Mighty Earth argue that this is actually the case: “[W]hen it comes to addressing the most important problems facing our world, including the destruction of the natural environment, the pollution of our air and water, the warming of the globe, the displacement of Indigenous peoples, child labor, and global poverty, Cargill is not only consistently in last place, but is driving these problems at a scale that dwarfs their closest competitors.” Mighty Earth highlight several problems in Cargill’s supply chains, for example: “It took Cargill months […] to address relatively simple issues in their palm oil supply chain that other companies had dealt with long ago.” and: “Cargill still does not have a comprehensive approach to prevent and address the growing intimidation and violence of human rights defenders that is widely prevalent in its supply chains for palm and other commodities.”
Understanding and Tackling Societal Grand Challenges through SCM Research
The Academy of Management Journal’s previous editorial team defined its term with a thematic emphasis on “grand challenges”, and called for research through editorials on a wide array of topics that explored global problems including climate change, aging societies, natural resources, societal resilience, digital workforce, digital money, and gender inequality among others, as well as methodological approaches with which to tackle them. They defined a grand challenge as “specific critical barrier(s) that, if removed, would help solve an important societal problem with a high likelihood of global impact through widespread implementation”. Certainly the most widely adopted grand challenges are the Sustainable Development Goals (SDGs) of the United Nations. Another example, not mentioned by the editors, are the planetary boundaries identified by Steffen et al. (2015). Following their emphasis, what could our discipline do to better understand and tackle societal grand challenges and maybe also in a more systematic way? Do we need to renovate our thematic and methodological portfolios? Some of these AMJ editorials can certainly be an inspiration for SCM research.
George, G., Howard-Grenville, J., Joshi, A., & Tihanyi, L. (2016). Understanding and Tackling Societal Grand Challenges through Management Research. Academy of Management Journal, 59 (6), 1880-1895. https://doi.org/10.5465/amj.2016.4007
The Cost of a Five-Dollar Dress
Social responsibility has after the Rana Plaza collapse become an integral part of many supply chain management courses across the globe. However, workers’ rights in textile supply chains, or a lack thereof, are actually an old story, maybe as old as modern textile supply chains. This is evidenced by an article from 1933, titled The Cost of a Five-Dollar Dress. The article argues: “If your clothes’ budget has been cut down and you buy bargain dresses, it is only fair you should know who pays part of your bill—the women who made the dress.” It seems that, by moving from one location to another, the social problem of the textile industry has acted like a nomad. Apart from the location – then New York City, now Dhaka – not much seems to have changed within the last century. Still today, the real cost of a five-dollar dress is paid not in dollars or euros, but by the workers upstream in the supply chain with their safety and health condition.
Apple & Foxconn: Financialization across the Pacific
It is always inspirational to find articles that, at first glance, fall out of our discipline, but, at second glance, change the way we think about supply chain phenomena. One of these articles is Froud et al. (2014): Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. This article argues “that thirty years ago favourable cost conditions helped build productive power in Asia, whereas now US financial power drives and benefits from low labour costs in China, using the very different supply chain positions of Apple Inc. and Foxconn International Holdings (FIH) as examples”. The article concludes by “observing that the rise of the post-national corporate player changes the alignment between large corporate interests and the US economy where Apple hoards its cash surplus and the success for the stockholders does not align with the broader needs of the US economy and society”. The perspective taken by the authors could be a very interesting complement to contemporary SCM courses.
Froud, J., Johal, S., Leaver, A., & William, K. (2014). Financialization across the Pacific: Manufacturing Cost Ratios, Supply Chains and Power. Critical Perspectives on Accounting, 25 (1), 46-57 https://doi.org/10.1016/j.cpa.2012.07.007
The Dark Secret of the Chocolate Supply Chain
We cannot spare our students the dark secrets of supply chain management. As future decision makers, they need to understand the social and ecological consequences their decisions might have somewhere else on this planet. The chocolate supply chain is a perfect illustration of the complex relationships between consumerism, supply chain management, value creation, and ethical consequences. I have been using this example in my SCM courses for years. So, what is the impact of chocolate? The environmental group Mighty Earth has recently published an investigation into deforestation caused by chocolate: Chocolate’s Dark Secret. Their team visited several protected areas inside Ivory Coast and found that illegal cocoa production has entirely overtaken areas that had been covered by rain forests in the past. Particularly, they found that the world’s largest chocolate companies are connected to cocoa from sources linked to illegal deforestation. The report illustrates how cocoa moves through the supply chain and how value is created in the chocolate industry.
Implications from the Rana Plaza Disaster (Guest Post by Brian Jacobs and Vinod Singhal)
Today’s guest post comes from Brian Jacobs and Vinod Singhal, who present the results of their recent research on social issues in global textile supply chains.
Rana Plaza, an eight-story building in Bangladesh that housed garment factories employing approximately 5000 workers, collapsed on April 24, 2013. The resulting fatalities (over 1100) and injuries (over 2400) made it one of the worst industrial accidents in history. The scale of this tragedy increased awareness of the risks and costs of sourcing from low-cost countries. Such risks and costs are often assumed to be sufficient to motivate firms to source production in developed, high-cost countries rather than developing, low-cost countries. To examine this assumption, we studied the stock market reaction to 39 global apparel retailers with significant sourcing in Bangladesh. We found that although stock market reaction to retailers on the day of the Rana Plaza disaster was negative, its magnitude and significance dissipated by the following day. Our research shows that capital market forces alone are insufficient to prevent tragedies such as the Rana Plaza disaster, or to motivate large scale changes in sourcing patterns. In fact, garment exports from Bangladesh have increased since 2013 even though substandard working conditions persist. While managers should weigh ethics and their moral obligation in addition to financial considerations, it is doubtful that firms can affect the needed changes without participation by non-market forces such as NGOs and policymakers. For full details of our research, please see our article The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance, forthcoming in Journal of Operations Management.
Vinod Singhal is a Professor of Operations Management and holds the Charles W. Brady Chair at the Scheller College of Business, Georgia Institute of Technology, Atlanta, Georgia. Brian Jacobs is an Associate Professor of Supply Chain Management at the Eli Broad College of Business, Michigan State University, East Lansing, Michigan.
Jacobs, B., & Singhal, V. (2017). The Effect of the Rana Plaza Disaster on Shareholder Wealth of Retailers: Implications for Sourcing Strategies and Supply Chain Governance. Journal of Operations Management DOI: 10.1016/j.jom.2017.01.002
The Refugees Who Make Our Clothes
Syrian refugee children “have been making clothes for British shoppers”, a BBC investigation has found. “All the brands say they carefully monitor their supply chains and do not tolerate the exploitation of refugees or children.” However, it seems that some brands do not have improved supply chain transparency much after the tragic Rana Plaza building collapse.
