What impact did 'Horse-gate' and Rana Plaza have on business?

Burgess COMMENTARY

Peter Burgess

What impact did 'Horse-gate' and Rana Plaza have on business?

This month, we're looking at transparency. Transparency has often been a topic of discussion but recent scandals have made it more of a priority for business.

Have you seen companies become more transparent because of incidents such as the horsemeat scandal? If so, how have they changed?

On the flip side, do you think companies will continue with 'business as usual' now that the scandal is out of the headlines?

We'd be grateful to have you weigh in to let us know about your own experiences or what you've seen.

The corporate world has had to face considerable consumer criticism for the Horse-gate situation and the Rana Plaza Bangladesh working conditions event. My impression from outside the corporate space is that the consumer was upset for a few weeks and then moved on pretty much forgetting both events. This is the way bad behavior on the part of the corporate supply chain has played out every time for a very long time.

I am somewhat annoyed by the number of organizations that seem to be working to reduce the problem of workplace safety and other supply chain abuses. Some of them ... perhaps most of them seem to be set up to provide cover for their corporate spnsors when things go wrong and they need 'stories' to feed into the PR response mechanisms that seem to exist in every well known brand and throughout the world of corporate products. Looked at another way ... if these organizations were serious about really solving the problems, we would be seeing a lot more evidence of action on the ground than we are.

My experience suggests that there is a huge amount of corporate knowledge that would inform about the abuse and potential abuse within the supply chain if only such information was allowed to be seen by the public and the customer. For reasons that are easy to understand, the corporate world has not seen fit to share these data with the wider world.

The post by Mary Stringer about EdiTrack (a comment on the 2degrees blog) opens a small window into the amazing technology and knowledge base that exists for supply chain management ... but it is only a tiny fraction of such information that gets into the news and is accessible to the consumer. Consumers remain completely in the dark about the behavior of the supply chain that is delivering their favorite products.

Recently I was looking into the footwear supply chain situation inspired by TruCost and PUMA ... specifically the work being done by Nike. I was quite impressed. But then I went to a Nike store and talked to the sales staff about what Nike was doing about a sustainable supply chain for their products. Turned out that none of the staff had any idea what I was talking about, though they knew all the selling points to encourage customers to buy top of the line expensive sneakers.

My impression is that the messages being promulgated by corporate PR and advertising are better funded than the whole of the global serious news industry, and especially the bit that does investigative journalism. The lack of transparency in the corporate space ... not to mention governments ... is a very serious problem that should be making the public very worried.

Sadly, we ... the consuming public ... are pretty much asleap.

Peter Burgess TrueValueMetrics

Anyone who keeps up with current events in the corporate social responsibility world is well aware of the tragedies that continue to affect the four million garment workers in Bangladesh. In the last year, the fires at the Hameem, Tazreen, and... 15 days ago Like CommentUnfollow Flag More

Gabriel Chesman, Aman Singh like this 6 comments

I am appalled at the apparent inability of the actors in our modern socio-economic system to get things right. There is a system dysfunction that needs to be addressed in a meaningful way.

The corporate world ... big business ... seems to be able to make pretty good profits while riding roughshod over almost everything that matters. Wages are in the middle of a race to the bottom ... together with concern over worker safety and health, over the welfare of their families, over the quality of life in communities, and over what is environmentally sustainable. Profit and stock prices seem to be the only metrics that matter to those who make the big decisions.

After a bit of inquiry ... not enough to be called research ... I am convinced that there are huge PR initiatives in place so that the brands have the material to control the story and avoid being associated with something that they are intimately connected with in any moral or ethical interpretation of the situation but can excuse themselves because of the way they structure all their contracts under the rule of law, and the story control that they have carefully constructed.

I don't see much that is really serious about changing anything. Where are the data so that I can make an informed decision about what I buy. Where are the data about the source of profit in the supply chain. My guess is that where the profit is made is not where the products are made, yet it is where the products are made that is the locus of workplace safety. The maximize profit and everything else gets pushed to the bottom is a depressing fact of modern market economy, and I cannot pretend to like it at this stage in the early 21st century.

Peter Burgess TrueValueMetrics 14 days ago

John Tepper Marlin • You are right that you have not done much research - not enough to entitle you to the sweeping generalizations that you make in this post. Not all company efforts are just PR. 8 days ago• Like

@John Tepper Marlin I like being taken to task. I acknowledge that I do not have a complete and definitive picture of everything, but I have been paying attention to the state of the economy and society for a very long time, and I continue to learn and continue to question what is going on. I have been a corporate CFO with a US based international company, and I have been a consultant for the World Bank, the UN and others which together has given me the opportunity to do assignments in more than 50 countries around the world. I do not like generalizations, and in my case I made the point that what I was saying would not satisfy some research criteria, but your rebuttal of my 'talking point' is an even more sweeping generalization.

Yesterday I was taking a visitor around some high end apparel and footwear stores here in the USA. To keep myself amused I started asking the sales help about the various 'green' initiatives that companies like Nike are associating themselves with ... and the various supply chain issues that the apparel industry is talking about. I did not find a single person that had heard of any of these initiatives. They had the sales pitch, but nothing about the green or sustainable dimension of anything. I was not surprised, and while I know there are many serious people who understand the importance of ethical business, there is a huge gap between what is now normal and what a new normal needs to be.

I am afraid that most of my generation of business, financial, political and academic leadership is in deep denial about the systemic dysfunction of the modern economy, but the silver lining is that many young people 'get it' and know that things have to change. So far, there has not been a clear articulation of what that change is going to be, but it will come, that is already clear.

I am an optimist ... the state of knowledge in science and technology is better than at any time in history by far and the number of educated young people is bigger than ever. This should be the basis for great optimism about the future, but the global economy is 'in a funk'. There has to be a reason. I would argue that the ideology about the economy that goes back to the work of Adam Smith could do with some rethink, in particular the economic dynamic surrounding productivity and the global economy that facilitates a race to the bottom for wages and the quality of life of those that labor for a living. Merely maximizing profit is no longer a viable socio-economic proxy for progress ... there has to be maximizing of the impact of economic activity on people, place, planet and profit, a more complex calculation, but not beyond the capacity of modern management systems should we choose to deploy them.

Sincerely

Peter Burgess TrueValueMetrics 7 days ago• Delete

Thanks for your comments, Peter. My article is part of a series of articles I am working on for CSRwire regarding key stakeholders in Bangladesh. Would love to talk more with you regarding your experience and thoughts. Please send me an email if you are interested. All the best, Kelly 4 days ago• Like

FYI there are two reform groups on Bangladesh, the Accord and the Alliance. A third group is just pulling out of Bangladesh. All three groups have legitimate reasons for being where they are. The reform groups are both agreed on factory inspections at every factory serving the major brands. This is not just PR. It certainly is overdue. However, companies like Tchibo and Gap Inc. were deeply involved in safety initiatives in Bangladesh before the latest round of disasters. It was not just PR. 1 day ago• Like

John ... I am well aware of the efforts of quite a few well-meaning groups to improve working conditions in Bangladesh and elsewhere (China, Thailand, Cambodia ... you name it) but the dirty big fact is that there is only one motivator in modern business and that is the growth of revenues and profit with everything else a distant last. This results in a race to the bottom with workplace safety something that is not going to get in the way of low cost high profit supply chains.

There are some highly ethical manufacturers in developing countries whose standards are world class ... I have worked for some of them. One of these was the COTONA/SOCOTA group in Madagascar. But there are many manufacturers that cut corners and compete on price alone and do very well financially until something goes wrong.

I am underwhelmed by the new initiatives ... Accord ... Alliance ... and unimpressed by the so called involvement of major brands in addressing workplace safety. As a former corporate CFO and a longtime international consultant, the scale of these initiatives has been tiny relative to the efforts to maintain margins and profits. I do not consider 'signing a declaration' as being a material sign of progress, something more is required to convince me ... and I am not seeing it.

It is interesting to me that there is a huge amount of data about the supply chain inside the various big companies that are involved in international procurement. These data would be of immense interest to the general public and could help inform consumer behavior with respect to product purchases. Will the consumer every have access to these data in the socio-economic structure that now exists? We all know what the answer is ... so something radically different is required. My guess is that the consuming public is going to have to come up with its own open data external to the corporate closed proprietary data systems ... and the good news is that this is now practical with modern technology and open data architecture.

Peter Burgess TrueValueMetrics 1 second ago