Crisis Breeds Opportunity for Worker Safety and Global Labor Rights

JULIA TAYLOR KENNEDY:You're listening to Impact from the Carnegie Council. Each episode, we explore a topic in global business ethics. This time, it's safety and workers rights. I'm Julia Taylor Kennedy.

The last two years have proven lethal for many factory workers in Bangladesh. One factory burned down in late 2012, [the Tazreen Fashions fire] nd another collapsed in April 2013 [the Rana Plaza fire], killing more than 1,200 workers in all. The disasters stunned consumers around the world who had been buying clothes made by these workers for global brands like GAP, Walmart and others.

JUDY GEARHART: Judy Gearhart, Executive Director, the International Labor Rights Forum.

JULIA TAYLOR KENNEDY: Gearhart has studied testimonies of the Rana Plaza workers. They knew they were at risk when they went to work the morning of the collapse.

JUDY GEARHART: Workers didn't want to go into Rana Plaza. They had been evacuated the day before.

JULIA TAYLOR KENNEDY: And so, the next morning workers stood outside the factory, reluctant to enter—because they knew there was a crack in the building.

JUDY GEARHART: And managers said, "You need to go in. We got to get orders met, we have to meet the orders for the global brands." Some of the workers who were most vocal in objecting were hit, and told to go get to work.

JULIA TAYLOR KENNEDY: That was just 30 minutes before the building collapsed at Rana Plaza. A few months earlier, workers had also sensed oncoming disaster in the Tazreen factory.

JUDY GEARHART: I met a woman from the Tazreen Fashions fire. She survived by jumping out a third story window. Her name was Nazma, and she told me that she smelled the smoke, and the manager was locking the gate.

JULIA TAYLOR KENNEDY: He was locking the workers onto the floor.

JUDY GEARHART: Because that manager, had he let the workers through the gate, he would have been stampeded. This woman survived with a broken back.

JULIA TAYLOR KENNEDY: About 100 of her colleagues didn't survive.

JUDY GEARHART: It was horrible. Gut-wrenching. Those factories had been monitored. They had been certified. So, there was a real awakening of people saying, "Hey, wait a minute. These systems are not protecting the workers."

JULIA TAYLOR KENNEDY: It was a really tragic lesson: corporations and civil society had failed to ensure safe working conditions, even when the suppliers were some of the biggest global brands.

JUDY GEARHART: Over the past 20 years, every few years there would be, you know, the new trend. So, first it was all these groups were setting up their codes of conduct.

JULIA TAYLOR KENNEDY: Levi's was inthe vanguard, putting a global code of conduct in place in 1992 that would apply to all contractors who manufacture or finish Levi's products. Levi's won awards for its code, and other global brands followed suit.

JUDY GEARHART: By the end of the 90's, most global corporations, especially in the apparel industry had a code of conduct for their suppliers.

JULIA TAYLOR KENNEDY: But many of these codes were flimsy.

JUDY GEARHART: Late 90's-early 2000's, a lot of people were debating what's the content of the code? There were many, many articles written—and debates gone over—about the specific language in codes of conduct.

JULIA TAYLOR KENNEDY: Many of them didn't include core labor rights: the right to associate, the right to bargain collectively, or to form a workers union. Since then, the content of the codes has gotten much better.

JUDY GEARHART: Now, I think, there's no company out there that would not include requirements for freedom of association and collective bargaining rights in their code.

JULIA TAYLOR KENNEDY: Enforcement of the code is a separate issue.

JUDY GEARHART: The whole field of labor rights has progressed in that you at least you have this recognition of these rights, but the recognition has really just been on paper. It hasn't been effective.

JULIA TAYLOR KENNEDY: Why not? Well, because of what's going on in what Judy Gearhart calls the "parallel universe."

JUDY GEARHART: Codes of conduct have been voluntary, they're confidential, and they don't have this meaningful role for workers. So, at the end of the day, what's been set up are global corporations monitoring their supply chains parallel to the rule of labor law systems that they said they were going to help support and strengthen.

You've actually had this kind of parallel universe set up, a multibillion-dollar universe of global auditing corporations auditing global supply chains for global companies, and they're not interfacing with ministries of labor. Ministries of labor have not advanced, they've declined, and they've got their own problems to solve. But they have no access to the information that the monitors are coming up with.

JULIA TAYLOR KENNEDY: In other words: Corporations put ambitious codes of conduct on the books for themselves and for their suppliers. And then they hire independent companies or non-profit organizations to come in and audit behavior along the supply chain.

But as Gearhart sees it, since those audits are confidential—and since corporations' relationships to the auditors are voluntary—short-term "profit motives" cause them to prioritize low-cost suppliers over safe, responsible working conditions. These companies set up a public face that complies with international labor rights standards and operate privately according to a completely different set of rules.

JUDY GEARHART: Basically you have a global corporation going to a factory, saying, "comply with this code of conduct, and show me that you've complied. Go pay an auditor, go get a stamp of approval, and show me your audit reports."

JULIA TAYLOR KENNEDY: But, the corporation might not ask any further questions.

JUDY GEARHART: The requirement was little better than getting the management themselves to sign on to it. And then on top of it, they would say, do all these things in the code of conduct, and we're not going to pay you a dime more. We're not going to pay for your audit, we're not going to pay for your improvements, and we're not going to pay you any more money. In fact, we're going to squeeze you and ask you to produce for less money each year.

JULIA TAYLOR KENNEDY: The incentives to keep production up despite major safety risks at Rana Plaza and Tazreen start to get a bit clearer.

JUDY GEARHART: The brands have had a hands-off procedure in place, saying, "Well, you know, if you're not doing well enough on these monitoring audits, then we're just going to walk away." But there's no, "Okay, we found a fire hazard. We're going to go talk to the labor ministry or the fire inspector, and let them know." That's never been part of these systems. It's disconnected from government enforcement.

JULIA TAYLOR KENNEDY: To Gearhart, this disconnect between the company, its labor force, and governing bodies accounts for many of the worker safety crises around the world. And she is working on some really creative solutions in Bangladesh that she's hoping can set a precedent for safety and workers rights around the globe. But before we get to that, let's look at one company—really, one CEO—that cracked the safety code.

BILL O'ROURKE: In 1987, Paul O'Neill was hired at Alcoa. Paul's the CEO. He made his number-one priority safety.

JULIA TAYLOR KENNEDY: The man you hear speaking is Bill O'Rourke. He's former vice president of environment, health and safety for the global aluminum manufacturing company Alcoa. At Alcoa, O'Rourke worked directly with then CEO Paul O'Neil on O'Neil's top priority: safety.

Paul O'Neil was so successful as CEO of Alcoa, he later went on to become U.S. secretary of the treasury. But when O'Neil took Alcoa's top job in 1987, the company was having trouble with worker injuries.
So, instead of focusing on profit as his number one metric for company health, O'Neil focused on safety. His right-hand man, Bill O'Rourke, told me all about it in a public interview in 2012.

BILL O'ROURKE: Every time he talked, his first words out of his mouth were about safety. Every meeting, the first agenda item was safety. Even at annual shareholders' meetings, the first words out of his mouth were, "In the unlikely event of an incident, we're going to proceed in an orderly fashion." This is from the CEO.

JULIA TAYLOR KENNEDY: As Alcoa was first developing its email system, O'Neil required daily updates about the safety statistics across the company. And he wanted a detailed report on every workforce injury within 24 hours of the incident.

BILL O'ROURKE:Then he instituted the health and safety audit system. He put together the protocols. "We're going to follow these protocols at all the locations, and then I'm going to send auditors out and they're going to report it. And oh, by the way, I'm going to raise this audit to the level of the financial audit."

JULIA TAYLOR KENNEDY: Most corporations have an audit department that includes IT and finance, and that's it.

BILL O'ROURKE: Not at Alcoa. The audit department includes IT, finance, environmental audits, and health and safety audits.

JULIA TAYLOR KENNEDY: That means executives had to report to the board of directors if they failed an audit. Then, O'Rourke and O'Neil turned to making sure rigorous safety standards extended to every global location of the corporation.

BILL O'ROURKE: A lot of people would complain about that because their incident rates automatically went up as soon as we put the OSHA standard in place. But one set of rules for the world, which was pretty good. He also didn't want a distinction between employees and contractors. If somebody is hurt at Alcoa, they're hurt at Alcoa.

JULIA TAYLOR KENNEDY: The stats show O'Neil's efforts paid off.

BILL O'ROURKE: Back in 1987, we had people for every lost workday, they were away close to five days on average. It's now less than two that they're away. So the severity has been reduced. I think it comes from this kind of focus and attention, driven by Paul O'Neill, that said, "Let's look at this area like a science, find out the areas, how do we focus on this the right way?"

JULIA TAYLOR KENNEDY: Many have since studied Alcoa to try and understand how the company put safety squarely at the center of its business strategy, and enjoyed both a better work environment and higher profits as a result. New York Times reporter Charles Duhigg wrote about the company and he discovered how deeply ingrained safety became in every Alcoa worker's life.[Read or listen to more of this Duhigg interview here]

CHARLES DUHIGG: One of the guys, Jeff Shockey, told me this crazy story where he did this once and his colleague did this. His colleague was driving down the street and he saw some city workers doing digging in the street without a trench-box to protect them. So he stops the car. This is on a Saturday. He's got his kids in the backseat. He stops his car and he gets out and he gives this safety lecture to these city workers about how they should be using a trench-box and they're not using safety habits.

I said to Jeff, "That's crazy."

He said, "But that's what happens, is that once worker safety becomes a habit, you start being proactive on it. You start doing it without even thinking twice. That's why you get to a place where you automatically stop and tell other people who don't even work for you, whom you've never met, that they need to use better safety methods."

JULIA TAYLOR KENNEDY: Here's why Duhigg sees O'Neil's management style as a paragon of behavioral change. Duhigg's recent book, The Power of Habit, is all about how individuals and companies can develop certain keystone habits that have all kinds of knock on effects—positive and negative—in the rest of their lives.

CHARLES DUHIGG: We know that for a lot of people exercise is a keystone habit. Right? If people start exercising habitually, they start using their credit cards less, they do their dishes earlier in the day.
And the reason why is because what happens—we think subconsciously—is that when you start exercising habitually you start thinking of yourself as the type of person who exercises habitually.

So when it comes time to pull out your credit card and buy something you don't need, part of your brain says: "Wait, I don't do that. I'm the kind of person who exercises habitually. I have lots of self-control."
And that's why it seems to set off this chain reaction.

JULIA TAYLOR KENNEDY: The same can happen with companies.

CHARLES DUHIGG: When Paul O'Neill said, "Alcoa is a place where no one will get injured, or we'll get as close to that as possible," it said to the company, "This is a place that values lives; it values you, the worker." It changed completely the relationship between management and workers.

By focusing on worker safety habits—by taking advantage of the cues and rewards around this—he was able to transform Alcoa and it ended up becoming the top performer in the Dow Jones Industrial Average within two years and becoming one of the safest companies on earth to work at.

JULIA TAYLOR KENNEDY: So maybe the key to getting safer operations is habituation: is getting each worker to prioritize safety over all else. But maybe the behavioral piece isn't everything. Worker rights advocate Judy Gearhart says really "getting" safety also includes listening to workers. And that's what she saw Paul O'Neil doing.

JUDY GEARHART: You can talk a lot about obsession with safety, but if you don't pair that with workers having their rights, I think it's not going to be successful in the long run. I've actually followed worker campaigns against Alcoa back when I was in Mexico 25 years ago. And I know that when Paul O'Neill was CEO, that some of those same worker organizations were more hopeful, and that there was a dialogue with Alcoa at the time, so, without knowing the details of the case, I would have to ask: That obsession with safety that Alcoa had, under Paul O'Neil, what else accompanied it? You can talk a lot about obsession with safety, but if you don't pair that with workers having their rights, I think it's not going to be successful in the long run.

JULIA TAYLOR KENNEDY: In fact, Bill O'Rourke also remembers the worker safety issues in Mexico.

BILL O'ROURKE: Paul O'Neill actually terminated a business unit president very publicly in an op-ed article in The Wall Street Journal, because this guy suppressed a big incident that happened at one of our plants in Mexico where 170 people were overcome with carbon monoxide poisoning and he didn't report that.

He claimed that he did during the investigation. If you read his report, you would have thought we had an open house at this location and a lot of local ambulances showed up. He suppressed that.

For doing that, a Benedictine nun showed up at one of our annual meetings and said to Paul O'Neill, "You're hurting people in Mexico." He said, "That's not true. If I was, I would have known about it within 24 hours. I don't know about it."

JULIA TAYLOR KENNEDY: Despite that response at the annual meeting, O'Neill privately had the incident investigated and found out that his Mexico business unit president had indeed suppressed the carbon monoxide poisoning.

BILL O'ROURKE: He was terminated publicly in a letter that says, "I knew him. I knew him well. I knew his wife. We were good friends. He grew that business dramatically to the point that it was the most profitable in Alcoa at the time. Still he violated the safety principles here."

JULIA TAYLOR KENNEDY: Now, because Alcoa owns its factories it has total control over management personnel and daily operations. And that may be another key to its success. Its CEO, auditing body, and factories were all aligned and had a high bar to meet on safety. The parallel universe of confidential, independent audits with public codes to appease civil society didn't apply to Alcoa. But the apparel companies outsourcing to Bangladesh are operating in a larger more fractured ecosystem.

Gearhart and others in her field have put together a new kind of agreement in Bangladesh that they hope will connect these parallel universes and align incentives for companies in the apparel industry.

JUDY GEARHART: We've been working with trade unions in Bangladesh to develop a program that would overcome the three fundamental flaws, which is the lack of transparency, the lack of a binding commitment from corporations, and the lack of a meaningful role for trade unions in the oversight of the program.

JULIA TAYLOR KENNEDY: The program is called the Bangladesh Accord on Fire and Building Safety. Gearhart's organization, the International Labor Rights Forum, is working with several other groups including the Bangladesh trade unions to create the accord.

JUDY GEARHART: The idea behind it was that if we can create this binding commitment, we can get companies to the global brands to stand by their factories while the factories make repairs.

JULIA TAYLOR KENNEDY: In other words, if an independent auditor finds a factory violates a safety code, the global brand can't ditch the factory for another one even if there's a delay in production to make the repair. This is a binding commitment from the global corporation, meaning that signing the accord is signing a contract instead of a non-binding promise.

JUDY GEARHART: Companies sign contracts all of the time. The language in it has it where if the global brand does not agree to do what the chief inspector of the accord asks them to do, it will go to arbitration in the home country of the brand.

JULIA TAYLOR KENNEDY: One hundred-and-fifty brands have signed the accord so far, including Adidas, and Abercrombie and Fitch. But that binding contract piece has been a dealbreaker for some.

JUDY GEARHART: It's not such a horrible thing when you think about it. Because the things that the chief inspectors are likely to ask for are things like, "Okay, you need to come up with a solution to a factory that's not proceeding with the fix. You might need to leave the factory if the factory's not proceeding with the fix." You know, they're really in the interest of the brand and the workers in the factory. You might need to cover the workers' salaries for six months while the factory's being fixed, things like that. In the grand scheme of things, the amount this could cost is not that large, especially given that you have so many brands now signing on to the accord.

JULIA TAYLOR KENNEDY: There's a lot of shareholder and consumer scrutiny on global brands with operations in Bangladesh, so it's a boost to a company's reputation to sign onto the accord. But there is another option: the Alliance for Bangladesh Worker Safety. It's also a transparent program, but the agreement is non-binding. Twenty-six brands have signed onto it so far, including some of the big name U.S. brands like GAP, JCPenney and LL Bean. Others in the labor rights space are watching the accord and the Alliance with great interest.

CLAUDIA COENJAERTS: I am Claudia Coenjaerts, and I am the President and CEO of the Fair Labor Association.

JULIA TAYLOR KENNEDY: The Fair Labor Association performs audits and spot-checks for companies and suppliers who have signed onto its code of conduct. While it doesn't have a binding agreement with these companies, the group does publish the reports on its website rather than keep them confidential. Coenjaerts is very interested to see how the binding agreements of the accord work in practice. We spoke by Skype, which accounts for a bit of the spotty audio you're about to hear.

CLAUDIA COENJAERTS: This could really be an opportunity to see whether a model of that kind of sustained commitment from brands in a very focused way can really make a change. But it's going to be also posing a lot of challenges. If you know a factory needs to close, even if you have a binding agreement, there are still issues as who pays: Is it the supplier? Is it the the buyer?

JULIA TAYLOR KENNEDY: For Coenjaerts, the key is to make the relationship between supplier and buyer a partnership, rather than an adversarial or contractual relationship.

CLAUDIA COENJAERTS: The task at hand is so much more complex. It's about poverty, it's about productivity, it's about the opportunity to create decent jobs. And many of the issues are systemic in nature. They're not industry specific. They're certainly not brand or buyer specific.

But we simply cannot divorce a discussion about what needs to happen in Bangladesh without really understanding the productivity issues, the specific concerns of workers. I do believe that the real stakeholder involvement is so important and, and that actually it is important that we keep politics out of the debate on the decision-making. And that we really look at those deeper issues.

JULIA TAYLOR KENNEDY: Hopefully, these Bangladesh tragedies can serve as a catalyst for companies, suppliers, and civil society to bring together all the lessons they've learned about writing codes and implementing them, requiring audits and working together to fix violations, and creating safety cultures while respecting worker concerns in a way that can set a precedent for other industries—and for other markets.

JULIA TAYLOR KENNEDY: Thanks for listening to Impact from the Carnegie Council, and a special thanks to our crack production team Mel Sebastiani, Terence Hurley, Deborah Carroll, and Amber Kiwan. I'm Julia Taylor Kennedy. You can find out more about this podcast at carnegiecouncil.org.