In April 2013 in Bangladesh, the Savar building collapsed, killing an estimated 1,300 garment workers and injuring another 2,500 in what became known as the Rana Plaza collapse.
The story intrigued me as an academic and global citizen wanting to find answers.
There is a long history of industrial accidents in Bangladesh factories, and there continue to be issues in the aftermath of these accidents.
This is despite decades of activism, including universities such as my own vowing to take responsibility for their supply chains. After Rana Plaza, North American and European clothing retailers, from Benetton to Joe Fresh, all claimed that this time was different.
They created two ambitious systems of auditing and supply-chain tracing, along with worker complaint lines, to reassure customers that their clothes were made safely and that major companies were taking responsibility.
In the aftermath of the accident, I worked with Maureen Benson-Rea, a business professor at the University of Auckland, to examine this supposedly game-changing set of agreements. The results, which came out in a collected volume, were not promising.
Among other things, we found an almost total lack of local labour enforcement by the Bangladeshi government, and an almost complete lack of follow-through on failed audits of multinational corporations (in this case, clothing brands), including remedial actions. Seven years later, nothing has really changed for Bangladeshi workers.
Trendy business model
Corporate social responsibility, or CSR, is a burgeoning business model. Spurred by a series of scandals, it has become a mainstay of our business schools.
However, CSR efforts haven’t stopped the continual parade of scandals, from Boeing’s 737 Max failures to the BP Deepwater Horizon oil spill and the well-known gaming of financial markets by investment houses, as depicted in books and films that include The Wolf of Wall Street and The Big Short.
Instead of progress towards decency in labour and environmental standards, we find ourselves in a continuing maelstrom of corporate social irresponsibility.
When matched with growing inequality, it’s no wonder we’re in a new age of populism and protest, with a reflexive reaction against big corporations. Far from being responsible citizens, large corporations are increasingly dodging paying even basic taxes.
There are three obvious sources of failure in CSR.
First source of failure: Neoliberalism
The first is the general move towards neoliberalism, or the faith in markets to create self-regulation by allowing companies and investment houses to make their own bets and supposedly suffer the consequences. Anyone with common sense knows that companies are wired towards profit and, in the absence of public policy, will put it above all else.
We shouldn’t forget that western labour and environmental standards were the result of government policy, not markets. In fact, the minute markets fail, companies consistently cry for government bailouts, as we saw in the 1980s-‘90s savings-and-loan crisis in the U.S., the 2008 financial crisis and the ongoing COVID-19 pandemic — all while financial services lobbyists block reforms to prevent future crises.
This has been enabled more generally because companies have been able to influence regulation, undoing any real reform efforts, and in many cases push false counter-narratives, such as climate change denial. In the Global South, where governments lack rule of law and institutional capacity, companies have a long history of feeding corruption and influencing governments to cut “sweetheart deals” to benefit them financially. CSR is important for marketing, not for the bottom line.
Second source of failure: Globalized production
The second source of failure is related to the globalization of production. Governments in the Global South have consistently voiced their opposition to rigorous labour or environmental standards on the grounds that companies will simply move their factories elsewhere.
The fight for jobs, consistent investment and the desperate need for access to multinational corporation’s retail outlets explains why coffee farmers, for example, take pennies on the dollar compared to large coffee retail chains like Starbucks.
Simply put, governments and workers in the Global South have limited bargaining leverage when it comes to large transnationals, and workers and local communities have even less. Clearly, a global system is needed to better balance the scales.
CSR advocates would point to the plethora of global initiatives, from the Global Reporting Indicators to the Extractive Industries Transparency Initiative, coming in the wake of The Global Compact, an agreement championed by the United Nations. These initiatives were ostensibly aimed at setting guidelines and demonstrating responsible behaviour.
Companies are spending an estimated US$20 billion per year on CSR to comply with these standards, and pay an army of consultants and NGO auditors to verify such. As I argue in a recent article in Global Affairs and in a special edition of the Journal of Developing Societies, such efforts are vacuous and more effective at public relations than at changing real-life outcomes.
Professor of Political Science, Simon Fraser University