Global apparel brands are facing uncomfortable questions about their brand values in the wake of the collapse of the Rana Plaza factory complex in Dhaka, Bangladesh where 1,127 people died.  The disconnect between the brand values promoted by companies using the factory and the reality of appalling working conditions and fundamental lack of rights for workers producing the garments is stark.   Failure to grapple with the issue to the satisfaction of consumers risks significant reputational harm and damage to brand equity.   Apparel brand owners are taking the challenge to heart.

CovBrands reported last month of H&M’s initiative to publish a list of its suppliers and in November that Tesco has launched an educational management program in Bangladesh.  And the latest initiative comes from H&M, Inditex (owner of Zara and Massimo Dutti), C&A, M&S, Mango, Primark, Tesco, Calvin Klein, Tommy Hilfiger and other brands that are making a joint effort to improve the conditions for textile workers in Bangladesh by signing up to IndustriALL and UNI Global Union’s Accord on Fire and Building Safety.

The Accord is a legally binding agreement between the signatories, the two global unions and a number of apparel unions and NGOs in Bangladesh.  By signing the Accord the global brands are pledging millions of dollars and committing to work with the unions collectively to tackle the issues that result in the unsafe working conditions and exploitation of apparel workers.

During a five-year period, the Accord will, among other things:  review existing building regulations and enforcement; conduct independent safety inspections with public reports;  carry out mandatory repairs and renovations; and provide a forum for workers and their unions to be heard (including developing a complaint process and a mechanism for employees to report risks).

Other companies (including WalMart) are using their corporate social responsibility programs to facilitate positive change for workers.

Whatever the approach, these brands recognise the potential damage to their brands of repeated crises of this nature — and the financial and business cost of mounting expensive crisis management campaigns when these issues hit.  In a shift of emphasis, brands are re-focusing on the preventative measures that they can take to reduce the risk of this type of disaster happening again.   Across the industry brands are looking again at their corporate social responsibility programs and thinking of new ways to raise standards and promote sustainability in the industry.

To manage reputational risk, brand owners that are manufacturing, or plan to manufacture, in developing countries will need to make sure that every component of their supply chain is sustainable and complies with their own high safety standards, ethical principles and brand values.  There are few shortcuts to doing this well, but basic contractual protections can help provide a framework for monitoring compliance and ensuring appropriate remedial action is taken if deficiencies are found.

Ten practical steps for brands to consider:

  1. Review the code of conduct:  review your code of conduct to make sure that it is up-to-date and deals with the principles and values that your brand stands for and, if it doesn’t, update it
  2. Make the manufacturer sign the code:  make it a condition to signing the contract that the manufacturer signs up to your code of conduct and social responsibility program
  3. Manufacturer to comply with the code throughout the contract: make it an express obligation in the contract that the manufacturer complies with the code throughout the duration of the contract
  4. Subcontractors to sign up to the code: if you allow the manufacturer to subcontract its manufacturing, make sure that the manufacturer makes the subcontractors sign up to your code of conduct and comply with its principles too
  5. Third party suppliers to comply with the code:  impose a contractual obligation on the manufacturer to make sure that its third party suppliers of raw materials comply with the principles laid out in your code of conduct
  6. Stop unauthorized production:  implement policies against unauthorized production – make sure that you make it an obligation on the manufacturer to tell you if it subcontracts the manufacturing
  7. Right to audit:  make sure that you include rights to audit the books and premises of the manufacturer, a subcontractor and a third party supplier so that you can make sure that the code of conduct is being complied with whenever you need to
  8. Stop using a third party supplier/subcontractor:  make sure that you can require that the manufacturer stops using a particular third party supplier or supplier if you discover that it is not complying with the code of conduct
  9. Right to terminate the entire contract:  make it clear in your contract that you can terminate the contract immediately if the code of conduct is breached by the manufacturer or a subcontractor
  10. Right to terminate manufacturing of certain product lines:  you may not want to terminate the entire agreement, but just make the manufacturer stop producing one or two product lines, so make sure that your contract is flexible and gives you this right