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Investor News - 21/05/2013

After Foxconn, the tragedy of Rana Plaza highlights the consequences of dumping on workers’ fundamental rights

The collapse of Rana Plaza in Bangladesh, which has lead to the death of more than 1,000 people working for suppliers of major international textile brands, brings a new light to both the extent and severity of the consequences of dumping on workers’ rights, that companies have a responsibility to prevent within the organization of their supply chain.

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The results of Vigeo’s analysis clearly show that the working conditions at suppliers and subcontractors are still largely characterized by the opacity of information given by businesses, in particular on the content of audits they conduct and corrective measures they consequently deploy.

Our recent studies show that 63% of listed companies under our review put in place measures that Vigeo judges as “very limited”  concerning the inclusion of social factors in their supply chain. Only 12% of companies report corrective measures introduced following the identification of problems related to the security or civil liberties of employees to their suppliers.

Alerts for companies sourcing from Rana Plaza have been issued by our analysts for our investor clients. Moreover, the companies that have signed an agreement on the safety of plants in Bangladesh with trade union federations on May 16 are being monitored by Vigeo in order to measure the effectiveness of the commitments taken.
These disasters are the result of persistent violations of fundamental conventions of the ILO (International Labour Organization), on freedom of association and decent working conditions, the weakness or absence of social rights and the absence of labor inspection in the countries concerned.

The often formal or artificial nature of codes of conduct and ethical charter , the pressure to lower prices faced by buyers, and the entanglement of stakeholders throughout the supply chain, make the principles they show weakly operative.

The impact of this tragedy on the reputation and branding of the companies concerned, its direct economic consequences in terms of ruptures in the supply chain, workers’ protest movements that have generated plant closures, have led companies and governments to react. Some governments have announced their intention to strengthen their regulations to change the social conditions of this still controversial industry. The European Union has indicated that, on its side, it pledged to take action by virtue of its trade rules.

The situation in Bangladesh is not isolated, and is reproducible at any time in other parts of the world, particularly in Latin America and Asia- the collapse of a factory in Cambodia on May 16 is a sad illustration of the reproducibility of such an event.

Keywords : Human Rights, World