Bangladesh - the warning signs were there

The difference between companies is sometimes stark, especially when it comes to supply chain management. There are those who acknowledge risk and work to mitigate it, and those who ignore the warning signs. And the warning signs were clearly there in regard to fire safety risk in Bangladesh, according to sustainability advisory firm Net Balance and Sedex, a not-for-profit membership organisation that works with buyers and suppliers to raise sustainability standards in global supply chains.

Last month Net Balance and Sedex teamed up to host an information session in Melbourne to discuss supply chain risk and management, with a focus on the clothing and apparel sector.

“One key area of discussion and interest was around the issue of fire safety in developing countries,” said Tom Smith, director of insight and planning at Sedex.

“When it comes to the top five global supply chain issues, fire safety comes out on top closely followed by health and safety management, working hours, storage and use of chemicals and worker health.

“When you dig deeper into the issue of fire safety, it becomes clear that many of the risks could be quite simply addressed. Sedex’s latest risk briefing identifies fire safety risks across a range of sectors in countries around the world. Globally, these include missing or inadequate exit signage (10% of fire starts), no or inadequate functioning emergency light (8.2%), a lack of visibility of signs and instructions (7.6%), blocked aisles and blocked exits (6.9%) and firefighting equipment either inadequately installed or not installed at all (5.8%),” said Smith.

So while the data is available, current policy and regulation provide little impetus for companies to understand and manage their supply chain risk. But both Net Balance and Sedex say the situation is changing, a fact supported by Sedex’s growing list of members and the demand for Net Balance’s expertise in the area.

“We are beginning to see the emergence of policies and standards on sustainable procurement and supply chain but information on strategies and performance is rare,” said Mark Lyster, Net Balance director.

“However, this is changing as stakeholders and consumers start to demand higher levels of transparency and disclosure regarding governance and performance throughout the supply chain. And global reporting frameworks such as the Global Reporting Initiative now require companies using its methodology to consider supply chain.

“The old organisational boundaries are moving and as that happens we will see more focus on management, disclosure and transparency throughout the supply chain. It won’t be enough to say you weren’t aware of an issue. Your shareholders and investors will expect you to manage this risk in the same way financial risk is managed because of the enormous impact it can have on reputation and licence to operate,” said Lyster.