Marcus Chung: A report from Bangladesh

January 27, 2013

ChungSadly, today’s guest post from my friend Marcus Chung is timely. The New York Times reported this morning on another factory fire in Bangladesh, this one killing seven women. Is this the price we must pay for cheap clothes? Marcus thinks not–although he’s just 36, he has worked for about a decade on corporate responsibility issues in the apparel industry, doing stints at Gap and Talbot’s. I’ve gotten to know Marcus as a fellow board member at Net Impact, a nonprofit organization of students and young professionals who want to use their business skills to make the world more just and sustainable. That’s exactly what Marcus, a Wesleyan grad with a Berkeley MBA, is doing in his current job, consulting for a global retailer of children’s clothing. Here’s his report from Bangladesh.

From the moment you arrive at the Dhaka airport, it’s clear that the apparel industry is vital to Bangladesh’s economy. Airport walls are lined with posters advertising local garment manufacturers, textile mills, and trims suppliers. Apparel accounts for between 70 and 80 percent of exports, so it’s no surprise that almost everyone on my flight from Hong Kong to Dhaka declared their profession as “buyer” or “sourcing” when clearing through immigration.

I visited Dhaka on behalf of a client to get a better understanding of the CSR challenges, trends, and opportunities that large apparel brands face in sourcing from Bangladeshi garment factories. Following November 2012’s tragic Tazreen Fashions factory fire that claimed the lives of more than 100 workers, there is renewed focus on how the industry can promote better factory working conditions. Tazreen was just the latest in a string of Bangladeshi garment factories that burned to the ground, but it also was the country’s most devastating in terms of lives lost.

Western mass-market apparel retailers source from Bangladesh because they can get a solid product at a competitive price. The apparel industry cannot ignore a fundamental commercial reality: Bangladesh has a ready supply of very capable garment factories that are filled with inexpensive labor. It’s not realistic (or probably advisable–MG)for companies to simply stop sourcing from the country. Therefore, the industry must do a better job of sourcing in a responsible manner that protects the rights of workers and includes basic commitments to a safe and healthy work environment.

A Multitude of Challenges

Over the years, I’ve heard many hypotheses about why fire safety continues to challenge so many Bangladeshi factory managers. Some cite an ineffective, corrupt government that does not enforce its own building code regulations. Others believe factory middle managers, myopically focused on production output, lack the ability or understanding to support fire safety practices with workers. Many believe pressure from Western brands to achieve low-cost goods encourages subversion of basic health and safety standards. I’ve heard people claim the root cause is a basic lack of infrastructure: old, multi-story buildings with poor electrical wiring; unreliable power supply (I cannot count the number of times the power went out during my visit) that causes short-circuits; and dusty, flammable materials lying dangerously close to unprotected electrical outlets. I spoke with one CSR leader who lamented a general lack of civil society and a culture where officials will agree to make improvements, but never follow through. [click to continue...]

Filed Under: Consumption, CSR, Global Poverty, Human rights, Sustainability, Workplace Tagged With: , , , ,

Who’s responsible for factory conditions in poor countries? Has CSR gone too far?

January 6, 2013

garment-factoryJust who is responsible for the fire in a garment factory in Bangladesh that killed more than 100 workers in November?

The factory owner? The government of Bangladesh? US and European brands and retailers who bought the clothes made there? Shoppers who demand the latest styles at low prices?

And who deserves credit for the improvements in working conditions at Foxconn, China’s largest employer and Apple’s biggest supplier?

Apple? The Chinese labor market? Journalists at The New York Times?

Similar questions could be asked about paint factories that discharge pollution into rivers, toy factories that use dangerous chemicals or factories everywhere that run inefficient equipment or burn dirty fuels.

For nearly two decades, a core belief of the social-responsibility movement  has been that western brands and retailers must take responsibility for the social and environmental performance of the factories in their supply chain. This has created an immense infrastructure–an industry, really, of consultants who write codes of conduct for those factories, inspect the factories, report on them and deploy a combination of carrots and sticks that, at least in theory, bring about improved performance.

In essence, US and European brands have become quasi-governmental, undemocratic standards setters and enforcers of social and environmental norms.

So how’s it working? The year just past put a spotlight on a glaring failure of that system–the fire in Bangladesh, where factory conditions in the garment industry are widely deemed to remain unsafe–and on what has been cited as one of its successes–the new transparency of Apple’s supply chain, and the improved conditions at Foxconn, which supplies HP, Sony, Dell and other electronics companies, as well as Apple. [click to continue...]

Filed Under: Business Ethics, Consumption, CSR, Economics, Environment, Global Poverty, Health, Human rights, Sustainability, Transparency, Workplace Tagged With: , , , , , , , , ,

Corporate America embraces gays. But what about gay marriage?

November 4, 2012

Gay rights hasn’t been an issue in the presidential campaign, and that’s good. “On gay issues, silence is golden,” says Jonathan Capehart, a Washington Post editorial writer. As recently as during the 2004 election, you may recall, Republicans put gay-rights measures on state ballots to draw out voters who would favor George W. Bush over  John Kerry. “We’re not the punching bags we were two elections ago,” Capehart says. The tide is turning.

Some credit for this belongs to corporate America, which has over the last two decades embraced the gay community.  Capehart made his remarks during a panel discussion at the 2012 Out & Equal Workplace Summit, a gathering of LGBT people in the business world. Out & Equal, an advocacy group, champions workplace equality, in part because changes in the workplace become a catalyst for broader cultural changes. [click to continue...]

Filed Under: CSR, Economics, Human rights, Politics, Workplace Tagged With: , , , , , , , , , , ,

Inside the Sustainable Apparel Coalition

July 25, 2012

The story of the Sustainable Apparel Coalition begins with a letter designed to get the attention of even a busy CEO. At the top: the logos of Walmart and Patagonia. John Fleming, who was then Walmart’s chief merchandising officer, and Yvon Chouinard, Patagonia’s founder, signed the letter, which invited chief executives of some of the world’s biggest clothing companies–fierce competitors, ordinarily–to join together to develop an index to measure the environmental impact of their products.

Their pitch, in part, read like this:

Creating a single approach for measuring sustainability in the apparel sector will do much more than accelerate meaningful social and environmental change. Standardization will enable us to maximize sustainability benefits for all buyers without investing in multiple sustainability technologies and certification processes, and ultimately empower consumers to trust claims regarding sustainably sourced apparel.

Finally, as an industry, we will benefit from the unique opportunity to shape policy and create standards for measuring sustainability before government inevitably imposes one.

…The time is right and the need is great for the apparel sector to move forward now, without further delay, in unison, with strong partners like you.

It was a risky proposition. What if it turned out that a competing company had a better sustainability story to tell? Would consumers be given access to the index? NGOs? Regulators? Most big retailers knew that they had very little visibility deep into their supply chains. Did they really want to find out, for example, that a supplier to one of their suppliers, in a factory they had never visited in China or Vietnam, exploited workers or dumped pollution into a nearby river? Any meaningful index would require companies to ask tough questions and, eventually, face demands from others to share what they had learned.

The letter went out on October 1, 2o09. Less than three years later, despite those risks, the apparel industry has made major progress towards creating a global sustainability index, which will be known as the Higg Index, to measure and score products, factories and companies. A first version will be released today (July 26) by the Sustainable Apparel Coalition, the nonprofit group that developed the index. Its vision? Nothing less than  “an apparel and footwear industry that produces no unnecessary environmental harm and has a positive impact on the people and communities associated with its activities.” The Sustainable Apparel Coalition (SAC)  hired an executive director, Jason Kibbey, in January, and today it has more than 60  members, representing brands, retailers and suppliers who together account for more than a third of the global apparel and footwear industry.

Consumers won’t see labels with scores attached to their T-shirts, dresses or sports jackets for years, but some companies are already using the tool to measure the energy use, greenhouse gas emissions, water consumption, chemical use and waste of their factories around the world.

The coalition and the index mean to do more than drive incremental change, Jason Kibbey (left) told me when we spoke last week. “This is about industry transformation so everyone can benefit from reduced risk as well as efficiency,” he said.

How and why did Sustainable Apparel Coalition and the Higg Index  come together so quickly? To find out, I interviewed key players including Kibbey; Rick Ridgeway, the vice president of environmental initiatives at Patagonia and a member of the SAC’s board; Mary Fox, a former Walmart executive, who with Ridgeway got the coaliation going; Michelle Harvey of Environmental Defense Fund, a member of the group’s board; and  John Whalen, a principal at BluSkye, a boutique consulting firm that helped guide the process. This story shows what an industry can do when people get together, commit to a goal and set aside as best they can their personal and corporate agendas.

* * *

[click to continue...]

Filed Under: Consumption, CSR, Human rights, Investing, Leadership, NGOs, Sustainability Tagged With: , , , , , , , , ,

Is investing in poor women good business?

February 29, 2012

A health educator at her work station in Bangladesh

One lesson of the Apple in China scandal is that factory monitoring is a necessary but insufficient way to improve the lives of workers in poor countries. Apple inspected its suppliers’ factories, but conditions remain harsh. While strengthening inspections and sanctions, smart brands and retailers are finding ways to help workers in their supply chains gain more control over their work and lives.

A program run by BSR (Business for Social Responsibility) called the HERproject, which gives women working in export factories access to health information, is an example of what could–and should–be done. Teaching young women about health, including reproductive health and family planning, is, by itself, a good thing. It also delivers a not-so-subtle message to factory owners that it might be good for their business to take better care of workers, instead of exploiting them until they are used up.

Many factory owners “see their workers as cogs in a machine” and act accordingly, says Racheal Yeager, who leads the HERproject for BSR. “That’s why there are high rates of turnover and high rates of absenteeism.”

“What we’re trying to do is change the mindset of the factory management,” she says. [click to continue...]

Filed Under: Business Ethics, CSR, Global Poverty, Health, Human rights, NGOs, Sustainability Tagged With: , , , , , , , , ,

And you thought G.I. Joe was already green…

December 8, 2011

GI Joe has been green since 1964, when the action figure first went into battle for toymaker Hasbro.

Now his plastic and cardboard packaging will be environmentally-friendly, too.

So will the packaging for such beloved toys and games as Mr. Potato Head, Play-Doh, Monopoly and Candyland, all of which, along with more recent phenomena like Littlest Pet Shop and  the Transformers, are made by Hasbro, a Pawtucket, RI-based firm that sold about $4 billion of toys last year.

Hasbro releases its first corporate social responsibility report today, and it should be available here. The company offered me a preview of the report and a chance to talk with Brian Goldner, the company’s CEO, and Kathrin Belliveau, vice president of corporate responsibility at Hasbro. [click to continue...]

Filed Under: Consumption, Environment, Human rights, Sustainability, Workplace Tagged With: , , , , , ,

Fair Trade: Even in tough times, growing fast

September 29, 2011

The proliferation of labels and claims at the grocery store can befuddle even the most conscientious consumer. What to buy? Organic produce? Locally grown vegetables? MSC-certified fish? Fair Trade coffee or chocolate?

Paul Rice, the president and CEO of Fair Trade USA, isn’t worried by the clutter. All the labels, he says, reflect a big trend–the growing appetite of food shoppers for  more “transparency and traceability.”

Says Rice: “Consumers want to know where their stuff is coming from. They want to know if it’s safe. They want to know if it’s healthy. They want to know what the impact is on the environment.”

“Consumers are increasingly using their purchasing decisions to express their values,” he says.

Of course, we’ve been hearing for decades that consumers are voting with their dollars; the trouble is, too many of us vote for crap too much of the time. But–and this is important–there’s good news when it comes to Fair Trade: Despite the sluggish US economy, it’s growing fast.

Sales of Fair Trade Certified products at mainstream grocery stores grew by 87 percent in the second quarter of 2011 over the previous quarter, according to recent data from  SPINS, which tracks the natural foods industry. Sales in the specialty and gourmet channels grew by 32 percent, for an overall growth rate of 63 percent.

What’s more, the range of products that are Fair Trade certified is expanding rapidly to include not just coffee, tea, cocoa and bananas, all which are grown in the tropics, but also sugar, flowers, honey, herbs and spices, beans and grains, wine and, most recently, apparel and sports equipment.

[Disclosure: After I'd begun writing this story, the people at Fair Trade USA, which is the leading independent certifier of Fair Trade products in the U.S., sent me a basket of goodies that included coffee, tea, chocolate bars, honey, Honest Cocoa Nova, Pink Guava Drizzle and a soccer ball. Let me know, please, if you've got a great recipe that calls for Pink Guava Drizzle.]

I spoke via Skype the other day with Paul Rice and Robert Grgrurev, a brand manager at Green & Black’s Organic chocolate which is going 100% Fair Trade, to learn more about Fair Trade and its impact. [click to continue...]

Filed Under: Consumption, Economics, Environment, Food, Human rights, Sustainability, Transparency Tagged With: , , , , , ,

Investments in genocide, hidden from view

November 30, 2010

Here’s what Eric Cohen, the chairperson of Investors Against Genocide, told a congressional hearing today:

It has been over 12 years since the U.S. imposed sanctions on Sudan and noted serious human rights abuses, seven years since the Darfur genocide began, six years since Congress declared it a genocide, and five years since the movement for targeted divestment from Sudan began Yet most financial institutions are still investing in the worst companies funding the genocide, and, through the fund offerings of these investment firms, millions of Americans are caught in the web of these problem investments, almost always unknowingly and without the possibility of choosing.

Tragically, he’s got a point. Better, he’s got a proposal–a requirement that mutual funds disclose whether they chose to be “genocide-free,” which is simpler than it sounds. Better yet, he had a receptive audience on Capitol Hill–Rep. Gregory Meeks of New York and Gary Miller of California, who are the chairman and ranking member of a subcommittee of the House Committee on Financial Services, as well as such interested legislators as Mike Capuano of Massachusetts, who has been active on Sudan issues. Congress could act to mandate fuller disclosure from the mutual fund industry next year.

Genocide in Darfur

Investors Against Genocide has been campaigning against money management firms that own stock in companies that do business in Sudan since 2006. (See Fidelity’s Sudan Problem at fortune.com and  Fidelity, Vanguard and the genocide in Darfur) The group has asked financial institutions to avoid investments in foreign firms that are known to substantially contribute to genocide or crimes against humanity, an approach it calls “genocide-free investing.” (U.S. companies can’t operate in Sudan) Socially responsible mutual fund families Calvert Investments and Domini Social Investments have also taken a leadership role, cleansing their portfolios of companies doing business in Sudan and asking others to do so. As Domini’s general counsel, Adam Kazner, told the submcommittee:

Investors are not simply passive actors in this system – they are playing a critical capital allocation role, and should be mindful of the implications of their investment decisions.

Congress has stepped up to the plate before. In 2007, it passed the Sudan Accountability and Divestment Act (SADA), which prohibits the government from contracting with companies doing business in Sudan and supports state and local divestment efforts. Thirty-five U.S. states have enacted legislation or adopted policies affecting investments related to Sudan, primarily in response to the Darfur crisis and Sudan’s designation by the U.S. government as a state sponsor of terrorism.

So what’s the problem? Essentially this–a small group of foreign companies continue to operate in Sudan. According to Cohen:

In Sudan, the CNPC group (including PetroChina), the Sinopec group, Petronas and ONGC are internationally recognized as providing the government of Sudan with the funding needed to support the genocide in Darfur. The government of Sudan has used 70% of its oil revenue to provide arms and funding for the genocide. Some of these same problem companies are also active in Burma and Iran.

Some U.S.-based mutual funds then invest in those companies. Fidelity, Vanguard and Franklin Templeton have been singled out by Investors Against Genocide for holding shares in Chinese oil companies.

No one from the  fund industry testified before Congress. Fidelity has said that stopping the genocide is a matter for government officials, not mutual fund managers, while Vanguard has said it has a human rights policy, while continuing to invest in companies doing business in Sudan.

Shareholder proposals calling for divestment were defeated at Vanguard and Fidelity funds, but that’s no surprise since most mutual funds investors automatically vote their proxies with managements. It’s safe to say that most investors would rather not see even a tiny fraction of their money supporting genocide in Sudan, or winding its way to Iran or Burma, with their terrible human rights records.

Investors Against Genocide has scored a couple of big victories. TIAA-CREF, to its great credit, first lobbied the Chinese oil firms to get out of Sudan and then sold its holdings. (Here’s the fund’s announcement.) The American Funds group also sold its stock in PetroChina, but did so without explanation.  Cohen told me: “I congratulate them even though they won’t say anything publicly.”

Some investors have taken note. Last May, the Unitarian Universalist Association’s Board of Trustees announced that it would end a 10 year relationship with Fidelity and move their $178 million retirement accounts to TIAA-CREF in order to be genocide-free.

You can read all the testimony, as well as a GAO report on the issue, here. Cohen’s testimony provides specifics on how genocide-free disclosure would work. Mutual funds would be required to disclose if they have a policy prohibiting investments in countries that have been subject to U.S. government sanctions for human rights violations. Right now, they report on their holdings only once a quarter, and their human rights policies, if any, can be hard to find.

Says Cohen: “Right now you need a doctorate in research to have a clue about who’s on what side.”

This seems like a classic example of investors’ right to know. Transparency would shed some light on the values of the investment firm, and we can hope that markets would do the rest.

Filed Under: Human rights, Investing, Socially Responsible Investing, SRI, Sustainability Tagged With: , , , , , , ,

Why I love Google

January 14, 2010

Let me count the reasons why I love Google: its speedy search engine, the oodles of free storage on Gmail, Google Maps that get me where I need to go, YouTube for video sharing and time-wasting and Google Analytics, to obsess over my blog readership.

chinainventions10-hpBut seriously folks—Google’s decision this week to withdraw from China, rather than accept censorship, is a breathtaking example of corporate values at work, and a landmark moment in the history of corporate responsibility. It’s the biggest and boldest statement any American company has ever made about doing business in China.

As Rebecca MacKinnon, an Open Society fellow and expert on both China and Internet freedom put it:

They are sending a very public message – which people in China are hearing – that the Chinese government’s approach to Internet regulation is unacceptable and poisonous. They are living up to their “don’t be evil” motto – much mocked of late – and living up to their commitments to free speech and privacy as a member of the Global Network Initiative.

Because Google is one of the world’s best-known and most-admired brands, its action will also create pressure on Microsoft, GE, Wal-Mart and others to deal in a more ethical way with a country whose economic potential is so great that businesses typically turn away when China imprisons political activists, restricts religious freedom and strictly controls what its 1.3 billion people can read and see. [click to continue...]

Filed Under: Business Ethics, Human rights, Media Tagged With: , , , , , ,

My five New Year’s wishes

January 3, 2010

HAPPY NEW YEAR 189Corporate America: Making the world a better place…or not.

That used to be the tagline of this blog, and it remains the standard I use to judge companies.

Are the jobs they create enabling their employees to flourish? Are their products and services improving lives? Are their shareholders earning good returns? Are they making their communities better?

Put simply, how well are they serving workers, customers, shareholders and communities?

Most companies, it seems to me, would like to serve better. To do so, they need better incentives. These incentives can take the form of government regulations (sometimes needed, but rarely optimal, because regulators often become captives of the industries they are supposed to oversee), industry standards (like sustainable forestry standards or Hollywood movie ratings, which general work well) or social expectations (like the growing desire of customers to patronize “good” businesses or avoid “bad” ones).

That brings me to my 2010 wish list. Each creates an incentive for companies to do business better.

Climate change regulation: Until Congress passes a law making it more expensive to burn fossil fuels, there’s no hope of solving the global climate crisis. This could be a simple carbon tax, the complex and pork-laden Waxman-Markey cap-and-trade bill passed by the House or the promising cap-and-dividend proposal from Senators Cantwell and Collins. Each approach has benefits and flaws, which we’ll get into some other day, but the best thing that could happen to business (and the planet) in the 12 months ahead is for the U.S., at long last, to stop allowing companies and the rest of us to pollute the atmosphere at will.

Corporate governance reform: What will it take for Congress, the SEC and America’s shareholders to recognize that so many boards of directors are failing at their job? You would think the near-collapse of the banking system would do it. Or the yawning gap between CEO pay and performance. Or the fact that so many corporate mergers end badly. The breakdown of corporate governance isn’t an easy problem to solve, but there are plenty of good ideas out there, ranging from requiring directors to win a majority of shareholder votes to finding ways to give activist shareholders more power to recall underperforming boards. The best boards will encourage companies to take a long-term and expansive view of their role in society. My friends Nell Minow (of The Corporate Library) and Bob Monks have been working heroically on these issues for decades. Reform is long overdue.

Sustainability ratings: How do the cleaning products of Seventh Generation, Method, Clorox and Tide compare? What’s the carbon footprint of a plastic bottle of Dasani, versus Aquafina or Poland Spring? Measuring the environmental impact of consumer products is a gargantuan task, and assessing the social impact is even harder. These aren’t jobs for the government. But a consortium of academics pulled together by Wal-Mart is trying to develop a sustainability index, as is a division of Underwriters Laboratory (which I wrote about here). It will take years to finish the job, but I’m hoping that Wal-Mart and UL they make real progress in the year ahead.

Human rights in China: As the economies of China and the U.S. become more intertwined, it’s incumbent on global corporations to use what clout they have to make clear that they disapprove of the way basic human rights are routinely violated in China. Companies that fear speaking out on their own should organize their peers to do so as a group. They could voice their support for political dissidents and environmental advocates, provide funding to human rights organizations and aggressively monitor the workplace and environmental practices of their suppliers. China shouldn’t be too big to fault.

Electric cars: Lots of forces have to come together for the electric car business to take off this year—a price on carbon would help, as would tax incentives for buyers and support for an infrastructure of charging stations. Most of all, consumers need to embrace electric cars—neither the automakers nor the government can force them on people, needless to say. But the environmental and national-security benefits of electric cars are so compelling that it’s my wish that 2010 become the year when electric cars move from talk to reality.

Happy New Year, blogreaders! Let’s hope 2010 is a good one for business, and for the rest of us.

Filed Under: Climate Change, Consumption, Corporate Governance, CSR, Human rights, Sustainability Tagged With: , , , ,
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