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DISNEY: Should Retailers Cut and Run from Bangladesh?

Thursday, May. 2, 2013

Western apparel companies have been under tremendous public scrutiny after the fallout of last week’s factory fire in Bangladesh that killed 400 workers. Retailers are torn between staying and improving conditions, and leaving Bangladesh entirely. Bangladesh is the second largest apparel exporter with $18 billion, 3.6 million garment workers, and some of the lowest wages in the world. Wal-Mart, GAP, and Children’s Place met in private recently to discuss improving worker conditions, while Benetton has repeatedly had to revise its explanation of relations to the factory. After a factory fire 6 months ago, Disney announced a one-year phase-out of all manufacturing in Bangladesh ending in March 2014. While retailers determine if they will follow Disney’s example, labor groups are urging them to stay and improve conditions as opposed to cutting their losses and running. Do these retailers have an obligation to improve working conditions in Bangladesh once they have used subcontractors there? Is it better to walk away and source clothes in another low-cost location? Is the problem instead that U.S. companies expect their clothes to be made at unrealistically low prices?

  Kirk: There is plenty of blame to go around. The worldwide search for cheap production does contribute to unsafe conditions. If the U.S. companies want low-cost production, they have to resist doing business with the very lowest cost suppliers who are most likely to be cutting corners. They have to find suppliers who produce quality clothes in quality factories. Most are only screening for the first. I hope they stay in Bangladesh; they will have the same problem in another country in five years if they don’t change their selection process.

  Patrick: Once Disney leaves another retailer will take its place to exploit the cost structure; and as Kirk mentions, the problem will migrate to the next low-cost region free of the public outrage associated with Bangladesh working conditions. To stop the cycle, monitoring groups such as the Business Social Compliance Initiative, which certified two factories in the building of the fire in Bangladesh, need to step up their standards. Higher standards will necessitate better margins for the factories providing the funds for building compliance, fire safety training, and adequate wages. It’s on retailers to only do business with certified factories, and up to consumers to hold them to it.

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Comments Comments

Joe Schmid said on May 3, 2013
Outsourcing to developing countries can't be ethically approached as an "Arm's Length Transaction." It doesn't pass muster of a Utility Test. Many US companies do outsource ethically and are successful. Looking past Utility, moving work out of US factories into developing country factories is generally denounced as unjust in the press. However when viewed in the receiving country where the poverty rate is 2X that of the US the move is viewed as Socially Just. So there is a dilemma of sorts. That being said there are other business reasons for not sustaining operations in Bangladesh. The Hefazet-e-Islami "siege of Dhaka" on this coming Sunday; and Prime Minister Sheikh Hasina following up on this week's promise of industry reform being among them. Disney is simultaneously pulling out of Ecuador, Venezuela, Belarus, and Pakistan citing World Bank's assessment of governing stability, accountability, corruption, and systemic violence. So it is not just Bangladesh. Disney may be leading the way by deciding only to do business with factories that partner with the Better Work program. Money talks . . . Disney is acting ethically. It's unfortunate that Bangladesh is killing the goose that lays the golden eggs (the garment industry). It has brought their country so far. - Like - 1 person likes this.
Patrick said on May 8, 2013
It's unfortunate that the Better Work program, or a similar agency, is not in place in Bangladesh; although, it looks like the International Labour Organization is in the "Design Phase" of doing so. While I certainly wouldn't say that Disney is acting unethically, it seems to me they are cut-and-running from the mess they made. Sure, if Disney believes that Bangladesh is beyond turning around, then leaving is the right move. But to get Bangladesh manufacturing up to standard, it requires a coordinated effort by retailers, and Disney's exit is a step in the opposite direction. - Like - 2 people like this.
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