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Retailers could use NGOs to report on safety conditions

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Outsourcing and offshoring expert Professor Michael Mol believes retailers could use NGOs to report on working conditions at factories they are using in countries like Bangladesh.

European retailers, including Primark, Tesco Hennes and Mauritz, have said they will sign an accord to improve safety conditions in factories in Bangladesh after a factory collapsed, killing more than 1,100 people. The deadline to sign the Accord on Fire and Building Safety in Bangladesh is Wednesday May 15.

Warwick Business School Professor Michael Mol says there is no way back for the garment industry, and expects them to carry on outsourcing to countries like Bangladesh, but he believes they can do more to help improve working conditions.

Professor Mol, who is a Professor of Strategic Management at Warwick Business School, said: “One way out of this dilemma might be to give independent monitors, like NGOs, full access to assess the working conditions in these factories and to allow them to report this.

“But it is unclear whether such openness is on the agenda for these companies.

“These companies will continue to outsource activities to Bangladesh and similar countries, there is not really any way back for the garments industry now. So they must develop ways to deal with these problems.

“Incidents like this one are of course completely unacceptable.

“This type of outsourcing is still very much driven by the desire to reduce the costs of producing garments. But the UK and other western companies continuously underestimate the total costs of outsourcing activities, especially to countries like Bangladesh.

“We have seen other instances of this in the past with Nike and IKEA. There are hidden costs to outsourcing, in this case damage to their reputation that they fail to understand and predict.

“The complexities of their supply chains mean it is impossible to directly manage all these different suppliers. And even if they could do it, this would raise the costs so much that outsourcing would look a lot less attractive – it reintroduces all the bureaucracy they tried to get rid of when they outsourced activities in the first place.

“So at some point they end up just having to trust whoever they are doing business with.

“From an ethical point of view that is simply not good enough, because the people they trust may have other motives and they might not all have the same ethical standards that their western customers want from them.”