Part-1Institutional approach for compulsory compliance
The engagement of global sourcing companies in upgrading the safety and security of the workers is also praiseworthy
Masihul Huq Chowdhury
Part-1
On 24th April three years back (2013), the devastating Rana Plaza collapse took place, when an eight storied commercial building collapsed in Savar. The nation will be observing the third anniversary of this sad incident with prayers for the soul of the people who lost their lives and also for them who got permanent disability due to this tragic incident. The rescue process ended on 13th May, 2013. The total number of reported death stood 1,130 with more than 2,500 injuries. It is not only the deadliest garments factory accident but also the deadliest accidental structural collapse in the world till date. The story of rise of garments manufacturing and exports of Bangladesh is indeed a successful one of our entrepreneurs and the workers. In 1983, the total number of factories stood at 384 employing around 0.12 million workers with exports of USD 31.57 million while in 2015, the total number of factories stood at 4,296 employing around 4 million and exports of USD 25.5 billion. This has necessitated the requirement for compulsory compliance requirement put up by the global buyers of our RMG. The stringent yet much required compliance regulations among which no factories in shared building, correcting required infrastructural changes in the the buildings to create fight off health hazards, putting up fire hydrants and fire doors etc to avoid the sad loss of lives, bringing in better health and safety standards, increase in the wages have streamlined the industry in global standards.
The institutional approach for compulsory compliance and the strategic move of the entrepreneurs helped the industry not only to face off the damages (both reputation and compliance issues bringing in possible severe detriment on the apparels with Made in Bangladesh, brand) but also to be well orchestrated to fill in the position on the China plus One strategy for the major global apparels sourcing companies. The engagement of global sourcing companies in upgrading the safety and security of the workers is also praise worthy. Global brands including HM, Mango, Primark, the Gap and Walmart, among a dozen others, have contributed $21.5m to the Rana Plaza Donors Trust Fund, which was set up to award compensation to victims and their families. The awareness of work place safety and adopt necessary measures in meeting the required stringent compulsory standards put up by ACCORD and ALLIANCE, facing off the strict competition in the global apparels industry, lowering margins due to changes in global apparels industry (in terms of lower demands due to recession in major European buying countries, forays made by neighbouring Asian countries including India, dynamics in the style and taste of consumers, change in global weather impacting the sweater industry etc). Moreover, the adversities brought in by challenges to meet the requirement of gas and environmental issues (including putting up ETP) have made the related costs to shoot northwards.
This brings the issue of Corporate Sustainable Profit (CSP) as one of the prime focus area. Corporate Sustainable Profit revolves around the idea that the profitability which the companies also take responsibility from an economical, environmental and social perspective and can become more profitable. That means a new holistic approach where economic, human beings, and the environment are interrelated to make profitability in a long-term sustainable manner. This creates an ambiance of a win-win-situation for all parties who are involved. Sustainable profitability can be achieved through a systemic approach where each step is a part of a complete value chain by production, coworkers, customers and brands. Through this process, corporates can gain a larger overall perspective on their own business.
The percentage of companies reporting a profit from their sustainability efforts rose 23 percent last year to 37 percent, according to the most recent global study by the MIT Sloan Management Review (MIT SMR) and the Boston Consulting Group (BCG). The study, The Innovation Bottom Line, was released on the MIT SMR website. The research suggests that business-model innovation, top-management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions, says Knut Haans, a BCG partner who leads the firms strategy practice and co-author of the report. Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards. In 1972 Milton Friedman wrote, The social responsibility of business is to increase its profits. His article warned against diverting managers attention away from making profits for their owners by promoting desirable social ends or building personal empires. Instead, managers should focus their efforts on maximising shareholder wealth. Since then the world has changed significantly and a growing chorus of scientists, campaigners and politicians are demanding companies executives do more to address global mega-challenges. Climate change, resource shortages, security risks and inequalities are just some examples of an increasingly fast-paced, complex and multi-dimensional business environment causing widespread concerns. While it is tempting to see such debates as largely a problem for existing businesses and politicians to deal with, many new enterprises are already displaying a fundamentally different attitude towards these issues.
In future, the fiercest competition for companies is likely to come from startups whose entrepreneurs are well aware of these global sustainability challenges and which they seek to address through innovative products and services.Faced with pressures to accept the wider role of stakeholders and responsibilities, companies largely responded by publishing Corporate Social Responsibility (CSR) or sustainability reports in the developed economies. This required challenging efforts of measuring, reporting and verifying non-financial data. Whether such activities are genuine attempts to communicate companies wider performance or merely serve as greenwashing has been the subject of intense debates. But many of these processes appear to be changing too. Reporting firms social and environmental performance is increasingly becoming more standardised and rigorous, much like reporting firms financial accounts. For instance, the International Integrated Reporting Council (IIRC) has made it its mission to embed Integrated Reporting into mainstream business practice for both public and private organisations. Both the UK and the EU have also introduced legislation requiring large companies to disclose environmental data such as greenhouse gas emissions and other non-financial information.
The first step towards achieving CSP is to study and analyse the product or the service and see how it can be made more sustainable and profitable. The fundamentals of CSP entail analysing what the product consists of: components such as working conditions, raw material and environmental impact. The study requires close collaboration with suppliers and allows companies to build a solid foundation in the effort towards a more sustainable profitability.
Environmental measures can result in savings and an increased income. Energy efficiency, use of recycled materials, minimising of material waste, and engaged and healthy employees are direct cost saving actions. As a business it is important to focus on the part of the product or the service process that needs attention and invest with the goal of shaping a more sustainable business.
(To be continued)
The writer, a banker by profession, has worked both in local and overseas market with various foreign and local banks in different positions
