The Perils of Competition and Outsourcing

Walmart, Sears, Disney, Gap, Ralf Lauren, H&M$,$ JC Penney, Target, Abercrombie & Fitch, KiK, M&S and so forth are some of giant Western companies who buy their garment products from many developing countries including China, Bangladesh, Pakistan, Egypt, Vietnam, and India. There remains tough competition among these countries about which countries can supply garment products to all these big companies at cheaper prices.

Bangladesh is one of these countries which has become the $2$nd largest supplier of garment products to Western companies. More than $5$ million workers, mostly women and girls work in the garment factories.

On $24$ April $2013,$ the collapse of the Rana Plaza building in Dhaka, Bangladesh, which housed five garment factories, killed at least $1,132$ people. Only five months earlier, at least $112$ workers had lost their lives in another tragic accident, trapped inside the burning Tarreen Fashions factory on the outskirts of Dhaka, Since the Rana Plaza disaster, no fewer than $109$ accidents have occurred.

These disasters, among the worst industrial accidents on record, awoke the world to the poor labor conditions faced by workers in the ready$-$made garment sector in Bangladesh. For some of the lowest wages of the world, millions of people are exposed every day to an unsafe work environment with a high incidence of work$-$related accidents and deaths, as well as occupational diseases. Most of the factories do not meet standards required by building and construction regulations. As a result, deaths from fire incidents and building collapses are frequent

When the Rana Plaza accident took place there was no financial compensation or support for dependent family members who lost their breadwinners. When the international and local human rights groups put pressures a small number of global buyers and private donors made some payments to victims in the months following the disasters, albeit on a voluntary basis.

A recent amendment to the labor regulations requires Bangladeshi employers to insure themselves against liability. The amounts of compensation envisaged are also very low and take the form of lump sums, offering inadequate protection to beneficiaries against ill health and poverty in the medium and long term. The system is also plagued by major practical application issues $($e$.$g$.,$ evasion, lack of proper enforcement, absence of effective alternative$),$ with the result that legal entitlements very rarely materialize.

Global giant companies have not shown any real interest in improving the working conditions of factories and raising the wages of workers. For effective changes, these global corporate houses need to increase the price while buying the products from the Bangladeshi owners. On top it$,$ they also need to put pressure on the Bangladeshi government to enforce the occupational health and safety measures. The global companies have not done anything in this respect. The question remains whether the giant companies can avoid these responsibilities.

Question $1$: Evaluate the corporate social responsibility performance of international and Bangladeshi companies as described in the case

Question $2$: Assume that you are Chief Executive Officer of Ralph Lauren. You have been asked to reform the corporate social responsibility framework of the company: What will be your recommendations? Answer the question focusing on any ONE method of shared value creation.