Is Walmart Partly to Blame For the Bangladesh Factory Fire?

On November 24, 2012, a fire at a garment factory that killed at least 111 people in Dhaka, Bangladesh, sparked global outrage and calls for higher international labor standards. The incident at Tazreen Fashions was not unique; several conflagrations at other garment factories in the country broke out after the tragedy. In fact, it is part of a long line of similar accidents in a country where 80% of its $24 billion in annual exports is dependent on manufacturing.

Soon after, an investigation into the cause of the fire was conducted, and multiple safety violations such as locked exits and the absence of fire escapes were identified. Clothes were also found that had been labeled for major corporations such as Walmart, Sears Corp, and Walt Disney. The companies have since told the media that they had not known or authorized this factory to be a part of their supply chains. The most criticized and vocal of those companies, Walmart admitted that the factory had been producing garments for its retail stores, but without its permission. It has since terminated its relationship with Success Apparel, the company that sub-contracted the work to Tuba Group, of which Tazreen Fashions is a part. 

As they have profound influences on not only the local economy but also a region's denizens and the environment in which their factories operate, transnational corporations have been increasingly criticized for their lack of concern and oversight in countries that manufacture much of their products. Labor rights groups such as the International Labor Rights Forum say, "low wages and sub-standard safety conditions remain a problem among many of [Bangladesh's] roughly 3,000 apparel factories because end-buyers squeeze them for rock-bottom production costs." Essentially, retailers such as Walmart claim they want to enforce more ethical safety and labor standards in these Asian factories, but they want their products to be so low-priced that they are making it difficult for the factories to operate according to those standards.

Of course, consumers in the West want their goods to be as cheap as possible, so corporations have an incentive to continue pressing for cheaper production. Scott Nova of the Worker's Rights Consortium estimates that it would take "big brand companies less than 10¢ per garment to ensure safe factories in Bangladesh," but cannot do so as long as companies continue to relentlessly haggle for lower prices from the suppliers, often to the detriment of their workers.

Corporate Social Responsibility (CSR)

The outsourcing of production to Asia has converted countries that were once dependent on foreign aid, such as Bangladesh, to thriving manufacturing economies. Yet manufacturing, one of the most important contributors to the local and state economy in these developing nations, is also one of the least profitable and valued in the supply chains of these major corporations. After decades of outsourcing cheap labor and lax oversight, some corporations are attempting to establish and implement higher labor standards for these poorly regulated factories as a result of international initiatives and public criticism.

In 2000, the UN Secretary-General established the United Nations Global Compact, which is an initiative to encourage businesses that operate in other countries to uphold the principles of human rights, fairer labor standards, environmental responsibility, and anti-corruption in the region. Familiar names such as Lego Group and Gap Inc. were featured in the UN Compact's "Inspirational Guide," a pamphlet designed to encourage other businesses in following industry leaders toward more ethical practices. Actions taken include developing guidelines for a company's suppliers and auditing their adherence to these established standards. Gap Inc. also conduct factory inspections to ensure safer practices were being implemented, and severed ties with factories that did not comply with or meet the guidelines.

To its credit, Walmart has also encouraged and implemented more socially responsible practices within its supply chain. In fact, it is changing how its suppliers in China think about their relationship with the environment. Orville Schell of The Atlantic notes that with over 30,000 Chinese factories making products for the company, how they do business will serve as a model for the rest of the industry. With the increasing prevalence of heavy pollution and unsafe products in the country, Chinese customers are willing to pay more for big-name brands, thinking that with their global reputations at stake, their products are trustworthier.

From a business perspective, Walmart's environmental initiative is helping rebuild its image, as it took quite a blow from scandals such as a class action lawsuit for discrimination of female workers, the employment of illegal immigrants, and environmental infractions. In 2008, then-CEO Lee Scott announced at a conference in Beijing that businesses that do not try to improve their environmental standards would be banned from Walmart's supply chain. Also, the corporation decided to buy food directly from cooperatives, which cuts out unnecessary parts of the chain, resulting in higher farmers' wages, fresher produce, and lower prices. "Green" and "organic" are fast becoming standard terms in the Chinese supplier and consumer vocabulary.   

However, whether the company's practices yield actual advantages remains to be seen. Critics contend that even though Walmart has enforced its environmental standards, reduced its suppliers' waste, and elevated industry standards for greener business practices, the problem of rampant global pollution still remains. Some also argue that a "corporate social responsibility" auditing industry has popped up that shifts the responsibility for compliance from Walmart to other auditors and suppliers.

But the problem of poor safety standards, inadequate wages, and environmental degradation seems to be rooted in something deeper. As long as people consume uncontrollably and constantly demand cheaper products, large companies will try to satisfy their needs by haggling their suppliers and contractors for lower costs. In turn, the manufacturers tend to cut corners concerning safety standards and workers' wages in order to scrape by. If we really wanted the tragedies in Bangladesh and other factories to stop, then we wouldn't mind paying a little bit more.

Even as companies are starting to take the initiative to be socially responsible, we should heed Schell's foreboding conclusion if we continue to consume as we do now. Although "this most innovative of corporate and statist green strategies may represent an environmental breakthrough and good business for Walmart, and good politics for the Chinese government, it may nonetheless end up being very bad business for humankind."