H&M Assumes Legal Responsibility for Safety of Outsourced Labor

One of the major issues that I have been speaking about is the fact in outsourced supply chains accountability and responsibility have been largely independent.  That when things went wrong on the factory floor, the brand could hold itself above the issue by saying that it was their suppliers who were the ones who were legally responsible for the failures.

A position that many consumers, particularly those loyal to the brand, have accepted.  A position that I have always felt was ultimately unsustainable due to the fact that at the end of the day these failures would impact the bottom line, and at some point that would draw in investors who would hold the brand accountable for their failures.

Something that has begun to occur more frequently, but even as the Apple’s of the world increase audits to show they are taking the complexities seriously, there had yet to be a company that accept that they were actually responsible for conditions on the floor or believe they an active obligation to the safety of the workers.  A condition supported, if only passively, as consumers were not pressing the firms on a level that would cause executives to change their position.

Until the a series of fires and building collapses in Bangladesh made the issues tangible. Tangible to those in Bangledesh who had lost family members.  Tangible to those who were tired of seeing their countrymen and women exploited by Western firms. Tangible to those globally who saw the reports and thought of their own warddrobe full of “made in Bangledesh labels”.   Which led to a wider and larger group of stakeholders to ask why firms were putting profit came before safety when the problems were well document, and ultimately to the announcement of a new labor Deal:

H&M Group, which operates six chains owned by H&M Hennes & Mauritz, said that the Avaaz ad had no influence on its thinking that led to its signing an agreement that for the first time would legally bind Western retailers to invest in improving worker safety in Bangladesh and other low-cost countries.

H&M’s decision broke the dam. Following its lead, other major European retailers, including Carrefour, Marks & Spencer and Inditex, parent of the huge Zara brand, said last week they would sign the accord, setting the stage for an industry wide collaboration to improve factory safety.

Under this accord, click here for full document,  it will be very difficult for firms to continue skirting their legal responsibilities to those on the factory floor.

In many ways, even though the accord does not explicitly say so, accountability and responsibility come back together just as if the firm were manufacturing in-house.  they will be legally liable for conditions on the line, and as such it will force buyers to make improve conditions.  A force that will ultimately lead to improved conditions as the economics of outsourcing change, buyers are forced to place orders with supplier in “safer” environments, and over site of buyers will have to go far beyond the audits that are now considered the norm.  Audits that many will argue have had any real impact, but now will prove vital as buyers will need to reference (and pay attention) to findings of audit teams.

So, while there are still holdouts that want to try and and maintain their position, I myself see this as a moment that we will look back on as a new chapter in outsourced supply chains. A chapter that will likely lead to more agreements in other industries, like electronics, and across geographies, like in Cambodia, Indonesia, and China.

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