One Year Later, The Deadliest Value Chain Continues

We have just passed the one year anniversary of the Rana Plaza disaster in Bangladesh that killed over 1,00o garment workers. On the anniversary of that senseless disaster,  Kamal Munir, a professor at the Judge School of Business in Cambridge, published an outstanding critique of why that terrible event happened and why it’s almost certain to happen again.


Over the last year, I had the opportunity to speak directly with people in the fashion industry (both at the brands and with the CEO’s of some of apparel manufacturers) and can attest that Munir’s’ analysis of the problem is spot on.

Describing the fashion supply chain, Munir notes:

Think of it as a network in which some nodes are central and powerful. These are the brands. There are others that are more peripheral and much less powerful. These are factories based in the developing world. Most of them are making “commodities”, or apparel that is essentially the same. They compete on price. In order to grow their profits, brands keep pushing factory owners – who pass on that pressure to hapless workers, whose desperate poverty leaves them little choice in the matter.

When it comes to the relationship between big brands and Bangladesh, the brands own the customers and have all the power. Bangladesh is desperately dependent on its apparel industry – it employs almost 4m workers and accounts for more than 80% of the country’s exports. It simply cannot afford to lose the business big brands send its way. And the reason they do it is only because Bangladesh remains by some distance the cheapest place on the planet to get a ready-made garment stitched.

In this equation, the Rana Plaza tragedy really becomes a problem only for Bangladesh. For the brands, it is no more than an inconvenience.

Munir goes on to hit the nail on the head when he notes that the real source of the issue is the lack of desire on the part of the brands to invest in the people and facilities that make their products:

The plight of Bangladeshi workers is not going to get better through Corporate Social Responsibility initiatives. Big brands are loathe to commit to any relationship beyond a few consignments, which makes them wary of investing anything in a particular factory. They are faced with a much more powerful imperative: increased profits.

In speaking to fashion executives they all agree that the actual price increase to a Western consumer of fixing the problem is tiny, perhaps two cents on the dollar on any garment. Yet, the brands turn a (mostly) blind eye to the problem, the factory owners keep taking chances with their workers’ lives, and the Bangladeshi government does nothing for fear that the brands will take their business elsewhere (thereby eliminating one of the few sources of foreign currency coming into the country).

It’s a vicious trap that will only end when (a) consumers demand it, (b) the brands decide that the economic risk of fueling this disgraceful state of affairs is too much to bear, (c) the Bangladeshi government decides that enough is enough, or (d) so many more people die in other tragedies that the world stops ignoring the problem.  After all, Rana Plaza was one disaster but not the only one. As Munir also notes: “In 2012, 289 workers died in a fire at a garment factory in Karachi. In the same year, at least 112 workers were burned alive in a similar factory outside Dhaka. ”

Every time a consumer in the U.S. buys a shirt or jeans at a retailer, she should stop for a moment and think about how little it would take to end the dark side of this value chain. Maybe it would mean one less garment per year for the average consumer. That’s not too high a price to pay to eliminate the almost certain risk of another group of poor people dying (literally) to give us cheap products.

Read more:

Carlos Alvarenga

Founder and CEO at KatalystNet and Adjunct Professor in the Logistics, Business and Public Policy Department at the University of Maryland’s Robert E. Smith School of Business.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s