Rana Plaza Disaster: NGOs Can Help Retailers' Business and Bangladesh Workers

European retailers, including Marks and Spencer and Hennes and Mauritz, may have signed an accord to improve safety conditions in factories in Bangladesh, but workers' safety could be vastly improved if they used non-governmental organisations to report on conditions.

After a factory collapsed, killing more than 1,100 people, European retailers have been under the spotlight.

There is no way back for the garment industry on this issue but it is likely that European retailers will continue to outsource to countries like Bangladesh.

However, they can, and should, do more to help improve working conditions.

Western Appetite for Cheap Clothing

Incidents, like this one, are of course completely unacceptable.

One way out of this situation 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.

I believe these companies will continue to outsource activities to Bangladesh and similar countries, so managers must develop ways to deal with these problems.

This type of outsourcing is still very much driven by the desire to reduce the costs of producing garments.

The minimum wage in Bangladesh is $38 a month and customers all want cheap clothing.

Hidden Costs of Outsourcing

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 companies fail to understand and predict.

At some point they end up just having to trust whoever they are doing business with.

Business Ethics

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 western customers want from their retailers.

The complexities of their supply chains mean it is impossible to directly manage conditions at all these different suppliers, as Walmart from the United States has promised to do.

And even if they could do it, this would raise the costs so much that outsourcing looks a lot less attractive - it reintroduces all the bureaucracy they tried to get rid of when they outsourced activities in the first place.

This is why NGOs could be part of the solution.

Michael Mol is a Professor of Strategic Management at Warwick Business School. He has also written a book on outsourcing entitled Outsourcing: Design, Process and Performance.

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