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During a Twitter conversation, James Governor discovered that D.K. Graments, a subcontracting factory in Jordan is allegedly violating the human rights of guest workers. I immediately Tweeted to say I would take this up for SDN. The allegations, which are made by the National Labor Committee start with:

D.K. Garments is a subcontract factory with 150 foreign guest workers (135 from Bangladesh and 15 from Sri Lanka), which has been producing Victoria’s Secret garments for the last year. None of the workers have been provided their necessary residency permits, without which they cannot venture outside the industrial park without fear of being stopped by the police and perhaps imprisoned for lack of proper documents.

and end with allegations of physical brultality. These are very serious charges. The headline sensationalizes the story by making a direct association betwen Victoria’s Secret and the brutal treatment of some of the workers. In an update dated 12th December,2007, it says:

After spending over a month in prison, where they were beaten, the six imprisoned Victoria’s Secret workers were forcibly deported and returned to Bangladesh on December 16. More updates will follow.

The Huffington Post, which provided commentary on the story went further, claiming: Victoria’s Secret, Slave Labor and So-Called “Free Trade.” The author extends the argument by referring to free trade agreements between the US and other countries noting that: 

The problem is that these deals, as I’ve pointed out before, are primarily about protecting the rights of capital. You can never hope to enforce labor rights (or for that matter environmental protections) under a regime that is focused on profit first, and community second. It will not happen. And all the statements to the contrary are just rubbish.

As far as I can tell, there has been no satisfactory resolution to the points raised. This is a complex set of issues but i want to add one more into the mix. Limited Brands, which owns Victoria’s Secret has been an SAP customer since 2005 when, in a press release, SAP announced that:

SAP AG (NYSE: SAP) today announced that leading upscale branded consumer packaged goods company Limited Brands, Inc. (NYSE: LTD) has selected SAP for Retail, including the SAP® Apparel and Footwear (SAP AFS) application, to manage its brand portfolio, retail operations andglobal supply network.

(My emphasis added.) You can see where this is going. It’s easy to see how unwittingly, important suppliers like SAP could get sucked into these debates even though it could not have known anything about the abuses. This is a common problem. How far does the mud get flung and where does it stick?

I have entitled this post ‘an ethical question.’ Now that ‘we’ know more about the various relationships, it sets up a debate about how companies like SAP, which are trying to be at the forefront of discussions around these basic human rights issues can respond with any degree of credibility. Hindsight is a wonderful thing but it doesn’t help us escape current facts.

Could the company include penalties in master sales agreements that allow for additional sums to be paid over as a way of compensating victims? Is that feasible? The ethical response is a resounding yes. But I can imagine that customers would be affronted at the suggestion. In light of what appears now to be appalling abuse, then why not? If there is an assessed risk then it makes sense to include that type of provision as part of the contract negotiation. At this late stage, what could SAP reasonably do, given that contracts almost certainly never envisaged this kind of situation?

I am aware that certain brands are becoming increasingly sensitive to these matters. In one conversation I had with a supplier operating out of China, I was told that companies like Coach and Wal-Mart set a high bar to ensure they are protected. They back this up with rigorous audits which carry heavy penalties. The startup compliance cost for a new supplier can be as much as 30% of first year revenue, leading to a situation where some suppliers simply walk away. Those companies that do stick by the rules are much more profitable than competitors because they win more business from demonstrated compliance investment and action. But – they are stuck with repetitive compliance costs, at least some of which could be eliminated:

Some companies are looking towards SA8000 as a way of providing a single international compliance standard for social accountability.

The real difficuly comes from the fact that contracts have legal weight and even though we may be appalled at such treatment, it is highly unlikely there will be provisions that cover this situation. Commercially, that’s an end of the matter but is it?

As a Global 2,000 provider, SAP will likely run into this issue from time to time. If it is to be taken seriously then it needs to demonstrate a commitment to fairness. This can be achieved in a variety of ways. I havealready mentioned problems in the supply chain which impact suppliers ability to minimize compliance costs.

Clearly companies need education and there should be processes in place that guard against the negative impact this might have on a customer’s reputation. That’s a demonstrable economic value add, even though it has the flavor of an insurance policy. It is the sort of thing that can be readily included within procurement contract processes, control and monitoring systems. Others may have other ideas.  

In the meantime, it is interesting to note that while there are more than 500 FaceBook groups dedicated to Victoria’s Secret in one form or another, I could not find a single one that talked about this issue. As Edmund Burke is oft quoted to have said:

The only thing necessary for the triumph of evil, is for good men to do nothing

It is a sentence that is growing on me by the day.

For more sites that surface the problem of slave labor, check this collection at WordPress.com 

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14 Comments

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  1. Community User
    While I am all for human rights ( shocking I know ) this is something that the market can only decide and enforce.  Outrage at everyone from Martha Stewart to Victoria Secret will drive companies to self-police and create better working conditions around the world ( yes, the World is Flat ).  I don’t think any mud slung at a company like SAP will stick, they just don’t have a duty to police this kind of stuff, they arejust too far removed from the situation.

    Should a murder victim’s family be able to sue a gun manufacturer because the assailant used a gun in a crime?

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    1. Dennis Howlett Post author
      I don’t think it is that simple. Huffington Post made the point that in the real world, profit trumps all in many circumstances – that’s why CSR is important. Markets are very poor judges of what works and what doesn’t from that perspective. As to the question of duty – it depends how you want to define that word.

      The gun analogy is interesting. Guns serve a single purpose but the person carrying the weapon has a choice. A gun requires a person to take deliberate action. 

      I’m not asking SAP (or anyone else) to police but I am suggesting they can put forward economic reasons why maltreatment is a bad idea.

      Similarly I’m not saying any mud would necessarily stick but the implied association is enough to open up questions of credibility.

      Finally – I’m not pretending the answers to these questions are easily found but if they are not raised then they don’t get answered – hopefully by people far smarter than me.

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  2. Ignacio Hernández
    Hi Dennis
    The whole world is full from things like this. IMO SAP is a software company and I want the best software from it. We cannot ask to SAP solutions for every bad thing in the world. For example. We cannot make responsible to Microsoft for some terrorists use its software. And I can ensure that everybody uses MS Office, even them.
    Citizens, communities and goverments can make a difference in this path. Even you. I think in this case you, me and SAP have the same responsability. Make the first step, we can learn from you.
    Regards,
    Ignacio.
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    1. Dennis Howlett Post author
      It’s an excellent question about how high (or low) you want to set the bar. Companies will decide for themselves but I believe that if you set high standards then as a vendor you are able to differentiate in ways that others may struggle to achieve. That has a direct impact on the economics of doing business.

      Part of that comes from the quality of product you create but equally you are measured by what you stand for. IMO.

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      1. James Farrar
        SAP is one of the few tech sector companies to sign on to the UN Global Compact which is broadly a public obligation to be accountable for and support human rights and environmental protection. It could be said to be a point of competitive differentiation. Personally I would prefer to see more peers and competitors similarly sign up and for the industry to move as a whole.
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  3. Jim Spath
    Dennis – interesting, provocative and even thought-provoking questions.  I can’t speak officially for my company’s policies, although I believe we have high standards, but I can comment on companies I own stock in – http://snurl.com/20cg0 – keep up the struggle.  //jim
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  4. James Farrar
    Dennis

    We are on the same wavelength — I have been working on a blog post on this for ZDNET when your post came through. This is a hugely complicated area but its as important as climate change in my view. In fact, many would argue that problems like climate change can only be unlocked by human rights.

    The post at ZDNET is a bit long but its a complicated issue and even that I found myself editing. Would be interested in your reaction

    http://blogs.zdnet.com/sustainability/?p=110

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    1. Dennis Howlett Post author
      It’s an excellent post James that sharply exposes the complexities. It seems to me that consumers have little understanding of the impact that such practices have on the goods and services they purchase. The question is do they care?

      Time and again we see examples where the exposure of malpractice can make a difference. It seems to me a good place to start.

      In the meantime, I sense there is a view that ‘no-one is to blame but everyone’s responsible.’ The question then becomes: now what? Who will take the first tangible steps to exert the kind of pressure needed to bring change? We can all wring our hands and look to the two extremes to which you refer but it won’t make a jot of difference until people take action. As you say in your ZDNet post: “It is the make up of the balance that is now in debate.”

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      1. James Farrar
        I don’t know if consumers care about his or not. To some extent they do but the value capture is complicated and it won’t work for everyone. But the brand differentiator thing, segmentation for me arouses mixed feelings. Years ago I always thought the Body Shop was successful becuase the rest of the industry didn’t care. I think we now have a much more healthy situation where a lot more industry players have to deal with this stuff. It may erode margin for those first movers but hopefully they go on to set the bar higher.

        I think there is a lot of change happening out there. Whether its happening fast enough is doubtful but I dont think govt is making a great fist of it either. We are in sore need of global political leadership.

        The exciting thing is to see business rise to this. Sure there will be some real clangers said and mistakes made along the way. So what! And you know what … even 10 years ago we could not have a conversation like this but now we can thanks to 2.0 and that openness will really help get business closer to its responsibilities and in greater touch with its stakeholders.

        We all live in the corporate glasshouse and thats a good thing I think.

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        1. Dennis Howlett Post author
          Curiously – in the example I quoted, the company concerned is making a healthy living – precisely because they make it their business to adhere to the standards their customers (Wal-Mart named, others you would know) are insisting upon. The fact is they bit the bullet in year one and made the necessary up front investment.

          What they’re asking for is a simplification of the way this is handled as between their customers. So that rather than dealing with 10 rule books, they all work (more or less) to a single agreed standard. That seems eminently reasonable without compromising the standards necessary to protect brand reputation while treating their offshored workers in a decent manner.

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  5. Paul Centen
    Hi Dennis, James, Marilyn, Jim,

    in an e-mail to-day James pointed me to this conversation. There is a series of such supply-chain scandals. I raised myself therefore the question of “how to get out here?”

    Clear, we need some indicators to support judgement on tolerance: yes/no. But if we narrow our view on these indicators only, we aren’t different to any court: they don’t prevent crime.

    So the question “to prevent” asks for the reason “to drive” such criminal actions and behavior. And sorry, but isn’t that this strange hype of late 90’s we still believe in. It is all about growth and owned luxury. To be different from others in the street. Not to enjoy live, but flag (also done by me) actions of execution. This drives the world crazy and leads to wrong implementations of growth strategies.

    Only as an example I published last Sunday in my own CSR blog (www.corporate-social-responsibility-eu.blogspot.com) on spending holidays on Galapagos ou European Mountains.

    Something went wrong over last 20 years regarding the perception of values of live. If we don’t adjust this mistake, we remain the policemen running behind fast driving cars.

    We need forward looking statements.

    Kind regards Paul

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