Explaining the Tazreen Fashions fire
It is not news, of course, that workers in developing countries generally endure working much harsher and much less safe working conditions than those in developed countries.
It is unusual, though, to see the different value set on the lives of poor people clearly documented so clearly in a business process.
Page 32 of the document sets out the ‘traffic light’-style assessment process, and includes the ‘orange level’ assessment which was accorded to Tazreen Fashions when it was assessed in June 2011:
- Factories are assessed as “Orange” if the violations and/or conditions observed were deemed to be high risk.
- Orders are released for shipment.
- Future orders may be placed at the factory, but is subject to the discretion of the merchandising and sourcing organization.
- Factory will be re-audited within six months from the last audit date.
The manual then goes on to make clear that three orange level assessments in two years will send a factory setting into the red zone, under which orders are stopped pending rectification of the problem(s) identified, and an audit bringing the factory back to yellow or green (there being the two best assessments).
Now, under just about any corporate governance system designed for developed country settings, the idea that conditions might be deemed ‘high risk’, but that a factory should be given up to two years and two more assessments to improve those conditions, would be just unthinkable; ‘high risk’ by its very nature means that accidents/injuries, or other forms of ‘non-compliance’ e.g. child labour are likely or very likely to occur.
Yet Walmart apparently deems such governance aceeptable in developing countries.
How can this be?
Well, the answer is set out in Walmart’s statutory ‘Form 10k’ submission to the US Securities and Exchange Commission, in which companies are required to set out risks facing their fiancial performance. At page 15, under the heading Risks associated with the suppliers from whom our products are sourced could adversely affect our financial performance, Walmart notes that
The products we sell are sourced from a wide variety of domestic and international suppliers. Global sourcing of many of the products we sell is an important factor in our financial performance. All of our suppliers must comply with applicable laws, including labor and environmental laws, and otherwise be certified as meeting our required supplier standards of conduct. Our ability to find qualified suppliers who meet our standards, and to access products in a timely and efficient manner is a significant challenge, especially with respect to suppliers located and goods sourced outside the United States. Political and economic instability in the countries in which foreign suppliers are located, the financial instability of suppliers, suppliers’ failure to meet our supplier standards, labor problems experienced by our suppliers, the availability of raw materials to suppliers, merchandise quality issues, currency exchange rates, transport availability and cost, inflation, and other factors relating to the suppliers and the countries in which they are located are beyond our control (my emphasis).
And there we have it.
Cheap labour is a key factor for Walmart’s profits, but the maintenance of the very supplier standards that Walmart sets is deemed beyond Walmart’s control.
* It is unclear at this stage whether Walmart was being supplied with garments made by Tazreen Fashions at the time of fire. Walmart have simply said that they do not know.