1

Rana Plaza collapse aftermath: Are CSR compliance and auditing pressures effective?

Sinkovics, Noemi, Samia Ferdous Hoque, and Rudolf R. Sinkovics (2016), "Rana plaza collapse aftermath: Are CSR compliance and auditing pressures effective?," Accounting, Auditing, and Accountability, 29 (4), 617-649. (DOI: 10.1108/AAAJ-07-2015-2141). • http://dx.doi.org/10.1108/AAAJ-07-2015-2141

2

3

Authors

Journal Ranking JWB - doi: 10.1016/j.jwb.2016.01.006

4

Authors — Sinkovics, Hoque, Sinkovics

• Dr Noemi Sinkovics » Lecturer in International Business and Management

The University of Manchester, Alliance Manchester Business SchoolNoemi.Sinkovics@manchester.ac.uk www.manchester.ac.uk/research/noemi.sinkovics

• Dr Samia Ferdous Hoque» Research Associate in International & Responsible Business

The University of Manchester, Alliance Manchester Business SchoolSamia.Hoque@manchester.ac.uk

• Prof Rudolf R. Sinkovics» Professor of International Business

The University of Manchester, Manchester Business SchoolRudolf.Sinkovics@manchester.ac.uk www.manchester.ac.uk/research/rudolf.sinkovics

5

Rana plaza context and trigger for this work

McKinsey (2011); LBL (2013); Kabeer and Mahmud (2004)

6

Trigger for this work

• The state of social standards complience» Since 2005, several incidences of factory fire, collapse and

labour unrest have been reported» Rana Plaza 2013 garments building collapse in Bangladesh

killed 1077; Primark and Mango labels were found inside

• Upgrading discussions in GVC/GPN literatures» Limited number of suppliers has started to move beyond

cut, make and trim (CMT) and to upgrade service levels» Large factories located in the export processing zones

(EPZs) and outside are mostly progressive and are the first tier suppliers of branded retailers

» Small ones focus on price and speedy delivery» Most firms sell through buying houses having no direct

contact with buyers

7

What does this paper specifically address?

8

Short summary of this paper

• Purpose» Intended and unintended consequences of compliance and auditing

pressures• Context

» Bangladeshi garment industry, post April 2013 Rana Plaza incident• Findings

» Case companies prioritise the implementation of measurable standards over socially grounded needs and priorities of workers

» Certain initiatives don’t add value, destroy social value» Compliance requires to find ways to recover compliance cost» Process upgrading through technological advancement means

increased work pressure on labour, increased power imbalance and

9

How do we approach this in the paper?

10

Approach taken

• Increased pressure for product quality and production quality (economic upgrading) » coupled with increased pressure for cost

reduction can lead to increased reliance on irregular workers in addition to regular workers (e.g. Barrientos and Kritzinger 2004; Rossi 2011)

• Social downgrading » is more likely to happen to irregular

workers, while regular workers are more likely to experience some degree of social upgrading from economic upgrading (cf. Barrientos et al. 2011)

• CSR compliance » does not necessarily lead to real

improvements for workers (cf. Locke 2013)

• Research approach: multiple case study

• Data collection method: » Face-to-face interviews with the

managers/owners and the workers» Collection of organisational

documents and secondary data• Data analysis: template analysis• Dimensions in the template

» State of social upgrading: dimensions in Barrientos, Gereffi, and Rossi (2011)

» Social value creation (Sinkovics et al. 2015)

» Impact on workers: emerged from data

Literature background Methodology

11

Approach taken

• Increased pressure for product quality and production quality (economic upgrading) » coupled with increased pressure for cost

reduction can lead to increased reliance on irregular workers in addition to regular workers (e.g. Barrientos and Kritzinger 2004; Rossi 2011)

• Social downgrading » is more likely to happen to irregular

workers, while regular workers are more likely to experience some degree of social upgrading from economic upgrading (cf. Barrientos et al. 2011)

• CSR compliance » does not necessarily lead to real

improvements for workers (cf. Locke 2013)

• Research approach: multiple case study

• Data collection method: » Face-to-face interviews with the

managers/owners and the workers» Collection of organisational

documents and secondary data• Data analysis: template analysis• Dimensions in the template

» State of social upgrading: dimensions in Barrientos, Gereffi, and Rossi (2011)

» Social value creation (Sinkovics et al. 2015)

» Impact on workers: emerged from data

Literature background Methodology

• The limitations of the social upgrading

approach• Measurable standards merely serve as proxies.

• Are these proxies really cues for significant improvements in

workers’ lives?

• Under which circumstances can they be?

• Enabling rights only mean something if they go hand in hand with the

fulfilment of social, economic and cultural rights

• e.g. the freedom of speech does not mean anything for those who

are starving

• a focus on a wider range of human rights would yield more

insights (Giuliani and Macchi 2014, Sinkovics et al. 2015)

12

Case profiles

13

Categories and discussion in the paper

14

Dimensions(Barrientos et al 2011)

Changes Social upgrading

Social value creation

Impact on workers

Measurable standards

Wage level Increased basic salary Yes No Reduced monthly incomeOvertime limitation (2-4 hours/week) reduced income

Social protection Improved fire safety and hygiene Yes Yes Improved working condition although workers think some new facilities are not important, such as child care centre, dining room.

Introduced child care and dining facilityIntroduced separate medical unit and doctor for first aid

Working hour Reduced overtime Yes No More pieces of garments produced in less time, while monthly income has reduced.Workers squeeze lunch time to complete daily targets on time

Daily production target to be finished within regular work hours

Enabling rightsFreedom of association Union participation not encouraged No No Workers cannot discuss their problems freely with

management Workers’ committee formed for liaison with management

Gender ratio No female workers in the supervisory team or quality checking team

No No Accept domination and verbal abuse from male colleagues

Skill development No formal mechanism for training; No No Workers have to pay the price for being unskilled while they receive no opportunity for skill development

Unskilled workers are downsized as cost per worker has increased due to compliance

Lost social value in transition

Lunch facilities stopped Not part of compliance

No Workers have to wake up early to cook lunch at home and also bear lunch cost

Prayer room converted into dinning space Not part of compliance

No No privacy in saying prayers

Downsizing to compensate the cost of compliance; stopped recruiting new workers

Not part of compliance

No Reduced job security;Reduced bargaining power with managementIncreased work pressure for remaining workers

The effectiveness of compliance: social upgrading vs. social value

15

Conclusions

Social upgrading can be regarded as meaningful when it also creates social

value The findings indicate human rights implications that occurred as a result of

the CSR standards compliance The loss of the prayer room (cultural right)

Loss of nutritious food (social right, right to decent food)

Loss of job that leads to the exclusion from the labour market (the right to work)

Increased pressure and fear for job has implications for mental health and well-

being Lost social value goes beyond social downgrading

The 4 case companies are small garment manufacturers with limited

resources. Their primary motivation for the adoption of CSR standards is

the hope that they can increase their competitiveness and attract more

buyers Does the case of larger suppliers differ in terms of the relationship between

social upgrading and social value creation?

Is the discrepancy between social upgrading and social value creation merely an

outcome of resource shortages?