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