In the light of the collapsed garment factory in Bangladesh last month, concerns are raised about the corporate reputation risks that come with globalisation. As Western fashion brands outsource production to low cost manufacturing countries like Bangladesh, they need to better understand the dynamics that make offshore production more competitive.
Often times it is due to more liberal regulations around health, safety and environment. Indeed, the world has seen numerous examples over the years of Western companies being caught up in scandals with suppliers from markets with less stringent requirements. For example, a rash of suicides at OEM manufacturer Foxconn’s campus in southern China in 2010 cast a shadow over its big brand name customers, including Apple and HP. And since the 1970’s a number of global clothing manufacturers have been accused of using “sweatshop” labour in developing countries to produce cheap goods.
So what can companies producing in lower cost markets do to protect their reputations?
Here are six principles that foreign companies operating in low-cost production markets should follow to better protect their reputations:
1. If the workplace health, safety and environmental regulatory framework of your sourcing market is less stringent than in your home country, find suppliers that are prepared to accept your home country’s requirements as their standard. That means you need to undertake thorough due diligence to identify and qualify your partners in your supply chain
2. Be prepared to pay a premium to ensure your partners can meet the standards demanded by you and your customers back home (it may make producing overseas more expensive but your reputation will remain intact).
3. Publicise what you are doing to improve working and environmental conditions in the market you are sourcing from.
4. Put in place a strong corporate social responsibility programme in the country you are sourcing product from to demonstrate your commitment to the local market and to create that shield for your brand in case something goes wrong (remember that Murphy’s Law is always in play).
5. Have a crisis plan, systems and processes in place to deal with a crisis in case it happens (that thing about Murphy’s Law again);
6. Constantly test and improve your crisis plan.
Companies should also ensure their principles and values are communicated throughout their organisations so that frontline executives working with partners in markets where legal and social frameworks are still developing fully understand HQ’s expectations.
These steps are no guarantee but they can help ensure that the reputations of foreign companies involved in the rag trade, as well as other businesses, do not end in tatters in some far away place.
Alistair Nicholas is a Senior Advisor in the Public Affairs Practice of Weber Shandwick Australia