Patil, Yash
Robert Tanner
5/11/2014
BIP: Final Paper
Time to do the Laundry
At 9am on the 24th of April, a textile manufacturing building in Dhaka, Bangladesh collapsed due to oversight from supervisors. 1129 people were killed and an additional 2515 were injured as a result. Many of the higher floors didn’t have permits to be legally constructed[1]. The workers were making 52 dollars a month in wages and lived below the poverty line. The clothes manufactured here would be exported and sold in stores like Walmart. Situations like these exist around the world, but only get recognized when disaster occurs.
Businesses are some of the biggest entities in the world. Some companies are even bigger than nations; 50 of the largest economies in the world are run by multinational companies; like General Electrics and British Petroleum which are bigger than UAE and Vietnam respectively[2]. The United States Government does provide 21 billion dollars in non-military aid to foreign countries, but this is nothing compared to the impact businesses can have. The textile industry in America alone generates 248 billion dollars in revenue and employs 75 million people globally. Businesses have the capability to empower workers and improve their mission while creating shared value[3].
What is shared value? CSV or Creating Shared Value is the process of aligning economic interests with societal interests to create value for stakeholders and shareholders. Corporations have taken on CSR or Corporate Social Responsibility, but this is a short term solution and is a response to external pressures, unlike CSV. Whereas CSV can improve a company’s profits and competitive position because it leverages its unique resources and expertise to create social and economic value[4].
Fair Wear, a clothing company (a project by the Fair Wear Foundation) created in response to the incident, provides above living wages to employees while implementing programs to better the worker and his/her family. Their website states that giving those that create the product a cut of the benefits isn’t just a good deed, but good business too. When companies can invest time and value in their workers, they are able to empower themselves and create a better working environment. When companies can make such a big change for people and themselves, why don’t they? Initially businesses were not as profit oriented as they are today. The best companies looked at their mission in a broader perspective, by meeting the needs of their workers, communities and supporting businesses. Eventually businesses had to deal with internal costs created by wasted resources, training and costly mistakes. They ‘internalized’ this cost by pushing it onto the environment and society. This led to the creation of the behemoth businesses we know today and subsequent government policy and regulation on them. Companies have always been trying to reduce these costs; either by improving technology and efficiency of supply chains or by reducing costs elsewhere. Walmart was able to save 200 million dollars in costs and reduce carbon emissions by shortening their truck delivery routes by 100 million miles and cutting down on packaging[4]. Companies like Fair Wear internalize these costs by strengthening their supply chain. This has been a proven strategy to improve revenue and produce shared value in the past too. Johnson and Johnson implemented wellness programs to reduce smoking and improve employee productivity and has since saved 250 million dollars in health care costs[4]. Companies must see that sometimes good deeds are good business decisions too. Fair Wear has realized this and has implemented several wellness programs for its employees, who mainly consist of Bangladeshi women from low income households. Many companies which outsource to low wage countries like Bangladesh hire a third party contractor or manager to oversee the production and manufacturing side of the business. Some companies have acknowledged that they are aware of the conditions their employees face, but do not intervene due to the lack of information or fear of what they might see. Companies must provide all their employees with a certain level of respect, work safety and financial assistance. When workers are no longer afraid of working and are sure that they will be treated fair and given equal opportunity, will they give back to the company. Companies must stop viewing labor as a product or just another cost, rather they must view their employees as an essential part of the businesses core, not just another short term investment. Only by strengthening the business from within can benefits be seen throughout the business. This means companies must make decisions that will influence them in the long run, not just choosing short term profit maximizing outcomes. Fair Wear Foundation is a Not for Profit multi-stakeholder initiative. Through several mechanisms applied in their supply chain a functioning model of shared value in manufacturing and industrial processes is established. Firstly, their Board comprises of four representing parties as well as an individual chairperson. The parties consist of business associations for garment retailers and suppliers, NGO’s and trade unions, each with equal voting rights. FWF also provides a complaint mechanism for workers as well as specialized audits and an FWF Code of Labor Practices that all companies planning to join must follow. The FWF Code of Labor is comprised of eight labor standards that are based on the conventions of the International Labor Organization (ILO) and the Universal Declaration of Human Rights[5]. Transparency in their management and functioning allows the business to work efficiently. FWF also shared their FWF Wage Ladder, a tool created by Rutledge Tufts as part of the Jo-In Project, which allows the wages paid at any factory to be compared against relevant local wage benchmarks created by NGOs, labor groups, business associations, and government agencies. This tool allows garment industries to provide workers with living wages while managing other aspects as well[6]. Companies that join FWF are given certification on all their products. This certification tells consumers that the clothes they are purchasing are ‘clean’ and are produced in a safe and sustainable environment. This improves brand image and a company’s mission from the core. When customers know that by choosing FWF certified clothes they are opposing acts like forced and child labor, buying a t-shirt becomes more powerful than just the act. Companies like Nike and United Colors of Benetton, which have been involved in unsafe labor scandals, would greatly profit from joining an organization like FWF[7]. By growing and outsourcing, companies have lost touch with their supply chains and they no longer work as the same business entity. Joining FWF would not only bring stability from end to end of the supply chain but would also give companies a reputable status. As of now FWF consists of 80 member companies representing over 120 brands and operates mainly in China, Bangladesh and India[5]. Most of these small brands have recognized the market failure that exists in these countries. Females have been proven to provide more of the money they earn towards their families stability and children’s education. Given the opportunity, they would work whole heartedly with a company that respects them and the responsibilities they face within a misogynistic and underdeveloped society. These women are uneducated, underpaid and abused, but when they can provide more for their families and themselves, they become bigger assets to the company. Not only will they work productively for the company and reduce internal costs but also create lasting relationships within the supply chain.
Companies avoid joining such initiatives due to the mentality of their short term profit maximizing boards. This must be changed and social change must be kept at the core of a company and not the periphery of its agenda. Social change can range from reducing pollution to improving worker conditions, which will increase value to society, environment and the company. If companies can regulate their supply chain, not only does it become more efficient but also reduces costs. The women and men of Dhaka represent one end of this supply chain. Their safety and stability is as important as those at the other end of the chain too. Companies must work to promote those in their supply chain that are underpaid, underage, abused or forced into labor. By realizing the needs and abilities of these workers, the company can utilize this market failure to create shared value for the people and the company. Their needs must be kept at the core of the company and not written down as just another ‘internal cost’.
Government regulation and policy making can also inhibit CSV. When incentives are given to companies that follow CSV, they produce more efficiently and it is beneficial to all involved. The FWF is funded by the UN Women’s Organization for its work in improving supply chains and combating violence against women in the workplace[8]. FWF also works with Fair Trade International and the CCC (Clean Clothes Campaign) to better its position and reach[9]. It may seem unlikely that multinational companies will immediately forego their cost reducing methods, but they must realize that reducing this ‘internal cost’ and increasing economic and social value can go hand in hand, not necessarily conflict. When governing bodies see that companies are making a positive change on society while improving economic stability, they will start trusting companies and create policy to further their businesses; creating a continuous cycle that is beneficial to government, society and the corporation.

Works Cited:
1. Foundation, F.W. 2014; Available from: http://fairwearclothes.com/the-problem/.
2. Top 100 Economic Powers. Available from: http://www.tni.org/sites/www.tni.org/files/download/state_of_power_hyperlinked_0.pdf, http://makewealthhistory.org/2014/02/03/the-corporations-bigger-than-nations/.
3. Foundation, F.W. FWF- The Solution. Available from: http://fairwearclothes.com/the-solution/.
4. Kramer, M.E.P.a.M.R., Creating Shared Value. Harvard Business Publishing, 2011.
5. FWF. FWF-About. Available from: http://www.fairwear.org/22/about/.
6. FWF. FWF Wage Ladder. Available from: http://www.fairwear.org/563/wage-ladder/.
7. Greenberg, J. and G. Knight, Framing sweatshops: Nike, global production, and the American news media. Communication and Critical/Cultural Studies, 2004. 1(2): p. 151-175.
8. UNW. FWF Funding. Available from: http://www.unwomenuk.org/un-trust-fund-announces-successful-grantees/.
9. Jo-In. CCC. Available from: http://www.jo-in.org/english/orgutler.html.