SUSTAINABLE BUSINESS: When Brands and Factories Work Together

S. M. Najmul Hasan

Bangladesh has emerged as a key player in RMG (Ready Made Garment) sector since 1978. Since 2005, the Quota free system started in the RMG industry and at the same time, international buyers have started to emphasize the issues of Compliance. Before placing their orders to a factory, a brand conducts an assessment on various fields of the labor standards like working environment, occupational health & safety, industrial relation and as well on its management systems.

Complying with Buyer’s compliance means the companies obey the rules, guidelines, standards have imposed by buyers and they fulfill the requirements of buyers in their daily operations. Those requirements are related with working environment, producing goods and handling an order till its shipment.

A healthy, positive, collaborative and creative work environment is really important for a company to build positive employee relations, to reduce employee turnover rates and labor unrest, to enhance worker productivity, to increase outsider interest and overall to create a valuable reputation for the company. And as a result the company gains buyer’s satisfaction.

 

Now days, buyer’s compliance is the most rising issue. If sellers /manufacturers failed to fulfill the buyers’ requirements, then there is a lot of changes for them   to face huge financial loss as well as loss their reputation in the market place. So it is for sure to get and ship an order a company should comply with all requirements of its buyer. Therefore to maintain the sustainability of compliance, the buyers and suppliers need to work together. Now the question is, HOW?

 

Before going to the solution, let’s focus on the main challenges of Managing Social Compliance in supply chain;

 

Complexity in supply chains: Every factory has numerous sub suppliers inside or outside of the country.  Due to their own complex network with numerous employees and business locations, it is really tough to maintain the compliance in an acceptable standard.

 

Different laws in different countries: The laws may differ from one country to another. For instance, the minimum age for employment in Bangladesh is 14, but in China it is 16. While in the UK, one is allowed to do “light work” at the age of 13. So it’s really hard to track these differences and monitor accordingly.

 

Lack of capable managers: Most of the brands have own Workplace Standards, those guide the factories on achieving acceptable working conditions, also advise the factories for addressing the root causes of problems and helping them to improve continuously  by developing and running their own management and governance systems. To operate and maintain these guidelines, factories need capable people who are trained, competent and experienced.  But unfortunately in so many cases there is a very limited supply of skilled middle managers with expertise in health & safety and human resource management skills. On the other hand where there are capable peoples, turnover rates are high.

Huge cost: To monitor social compliance, every organization needs to employ sufficient resource persons and to organize sufficient training program which are extremely cost-intensive.

Lack of transparency: Most of the organizations use isolated or independent management systems and processes those don’t provide sufficient visibility or transparency into social compliance.

However factory has to overcome all the challenges for making their business sustainable. As part of that, the factories need to be cooperative and supportive toward brands. To do so the below issues must be taken care of:

Responsible and competent compliance personnel: The factory must employ experienced  and competent compliance personnel who will ensure that Social compliance requirements are being met and also act as a point of contact for the factory.

Understanding the requirements of law and buyer’s code: The factory must have a good understanding on all applicable laws, regulations and standards relating to their operations. Also they have to have a good knowledge about Buyer;s code  and respective risk issues.

Strong role of compliance department in monitoring program: The factory’s compliance representatives must hold sufficient authority to interfere in the monitoring process including but not limited to recruitments of employees, their benefits and acceptable working conditions. To do so, factory must adhere a strong monitoring program internally from all aspects of compliance requirements.

Transparency in record keeping: Factory must maintain true and accurate records relating to compliance with the customer code of conduct. This may include, but is not limited to, records of workers working hours worked and wages paid for all employees. ALL records must be made available to the brand representatives during monitoring visits or on request. Failures of transparency may have a significant adverse effect on the business relationship with customers.

Increasing employee awareness: Factory must communicate with its employees regarding their rights and duties according to local law and Buyer CoC.

Being positive towards corrective action plan:  Factory must have positive attitude towards the respective corrective actions on the identified non-compliances and for ensuring remediation within the timescales set. All the buyers support remediation, not termination and are willing to work with factories those have the courage to address the issues related to social responsibility in an appropriate way.

Strategy of the brands towards factories: 

Normally all brands strategies are based on a long-term vision on self-governance of their suppliers and focuses on:

Supporting the business partners in their efforts to establish effective human resources, health & safety and environmental management systems.

Building capacity within the workforce and the management of the supply chain to ensure fair and safe working conditions.

Raising awareness level and promoting best practices, and 

Expanding the interaction with local worker organizations and NGOs to better understand the working conditions in places, where their products are made.

The brands act as both auditors and consultants for assessing management commitment to their ‘Workplace Standards’, they also train their suppliers on the key issues to help them understand on what is needed from them to achieve self-governance.

For ensuring effective and efficient dealings between brand and factories, transparency and due diligence together is the key. In all aspects, factory should be transparent to its brands for the maximum outcome and uninterrupted business flows.

Writer: Compliance Manager-Bangladesh, G. Gueldenpfennig GmbH

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