Institutional approach for compulsory compliance

On 24th April three years back (2013), the devastating Rana Plaza collapse took place, when an eight storied commercial building collapsed in Savar. The nation will be observing the third anniversary of this sad incident with prayers for the soul of the people who lost their lives and also for them who got permanent disability due to this tragic incident. The rescue process ended on 13th May, 2013. The total number of reported death stood 1,130 with more than 2,500 injuries. It is not only the deadliest garments factory accident but also the deadliest accidental structural collapse in the world till date. The story of rise of garments manufacturing and exports of Bangladesh is indeed a successful one of our entrepreneurs and the workers. In 1983, the total number of factories stood at 384 employing around 0.12 million workers with exports of USD 31.57 million while in 2015, the total number of factories stood at 4,296 employing around 4 million and exports of USD 25.5 billion. This has necessitated the requirement for compulsory compliance requirement put up by the global buyers of our RMG. The stringent yet much required compliance regulations among which no factories in shared building, correcting required infrastructural changes in the the buildings to create fight off health hazards, putting up fire hydrants and fire doors etc to avoid the sad loss of lives, bringing in better health and safety standards, increase in the wages have streamlined the industry in global standards.
The institutional approach for compulsory compliance and the strategic move of the entrepreneurs helped the industry not only to face off the damages (both reputation and compliance issues bringing in possible severe detriment on the apparels with ‘Made in Bangladesh, brand) but also to be well orchestrated to fill in the position on the China plus One strategy for the major global apparels sourcing companies. The engagement of global sourcing companies in upgrading the safety and security of the workers is also praise worthy. Global brands including H&M, Mango, Primark, the Gap and Walmart, among a dozen others, have contributed $21.5m to the Rana Plaza Donors Trust Fund, which was set up to award compensation to victims and their families. The awareness of work place safety and adopt necessary measures in meeting the required stringent compulsory standards put up by ACCORD and ALLIANCE, facing off the strict competition in the global apparels industry, lowering margins due to changes in global apparels industry (in terms of lower demands due to recession in major European buying countries, forays made by neighbouring Asian countries including India, dynamics in the style and taste of consumers, change in global weather impacting the sweater industry etc). Moreover, the adversities brought in by challenges to meet the requirement of gas and environmental issues (including putting up ETP) have made the related costs to shoot northwards.
This brings the issue of Corporate Sustainable Profit (CSP) as one of the prime focus area. Corporate Sustainable Profit revolves around the idea that the profitability which the companies also take responsibility from an economical, environmental and social perspective and can become more profitable. That means a new holistic approach where economic, human beings, and the environment are interrelated to make profitability in a long-term sustainable manner. This creates an ambiance of a win-win-situation for all parties who are involved. Sustainable profitability can be achieved through a systemic approach where each step is a part of a complete value chain by production, coworkers, customers and brands. Through this process, corporates can gain a larger overall perspective on their own business.
The percentage of companies reporting a profit from their sustainability efforts rose 23 percent last year to 37 percent, according to the most recent global study by the MIT Sloan Management Review (MIT SMR) and the Boston Consulting Group (BCG). The study, “The Innovation Bottom Line,” was released on the MIT SMR website. “The research suggests that business-model innovation, top-management support, collaboration with customers, and having a business case are all critical to creating economic value from sustainability activities and decisions,” says Knut Haanæs, a BCG partner who leads the firm’s strategy practice and co-author of the report. “Executives need to view sustainability as both a business necessity and an opportunity. Even moderate changes to company business models can reap significant financial rewards.” In 1972 Milton Friedman wrote, “The social responsibility of business is to increase its profits.” His article warned against diverting managers’ attention away from making profits for their owners by promoting desirable social ends or “building personal empires.” Instead, managers should focus their efforts on maximising shareholder wealth. Since then the world has changed significantly and a growing chorus of scientists, campaigners and politicians are demanding companies’ executives do more to address “global mega-challenges”. Climate change, resource shortages, security risks and inequalities are just some examples of an increasingly fast-paced, complex and multi-dimensional business environment causing widespread concerns. While it is tempting to see such debates as largely a problem for existing businesses and politicians to deal with, many new enterprises are already displaying a fundamentally different attitude towards these issues.
In future, the fiercest competition for companies is likely to come from startups whose entrepreneurs are well aware of these global sustainability challenges and which they seek to address through innovative products and services.Faced with pressures to accept the wider role of stakeholders and responsibilities, companies largely responded by publishing Corporate Social Responsibility (CSR) or sustainability reports in the developed economies. This required challenging efforts of measuring, reporting and verifying non-financial data. Whether such activities are genuine attempts to communicate companies’ wider performance or merely serve as “greenwashing” has been the subject of intense debates. But many of these processes appear to be changing too. Reporting firms’ social and environmental performance is increasingly becoming more standardised and rigorous, much like reporting firms’ financial accounts. For instance, the International Integrated Reporting Council (IIRC) has made it its mission to embed “Integrated Reporting” into mainstream business practice for both public and private organisations. Both the UK and the EU have also introduced legislation requiring large companies to disclose environmental data such as greenhouse gas emissions and other non-financial information.
The first step towards achieving CSP is to study and analyse the product or the service and see how it can be made more sustainable and profitable. The fundamentals of CSP entail analysing what the product consists of: components such as working conditions, raw material and environmental impact. The study requires close collaboration with suppliers and allows companies to build a solid foundation in the effort towards a more sustainable profitability.
Environ­mental measures can result in savings and an increased income. Energy efficiency, use of recycled materials, minimising of material waste, and engaged and healthy employees are direct cost saving actions. As a business it is important to focus on the part of the product or the service process that needs attention and invest with the goal of shaping a more sustainable business.

Sustainability also addresses how companies can attract motivated and engaged employees that work towards increasing business developments. Now a days it is becoming more important for the companies to strive to become more engaged in the areas where the leadership strives for ever-improving agreements, policies and values. Companies are facing a great challenge to implement CSP in their operations and communicating changes internally and externally. Profitability comes when employees feel more engaged with their work. This in turn leads to better performance and efficiency, an important factor for companies who want to maintain an increasing level of profitability. Customers demand an increasing amount of products and services that are socially and environmentally responsible. This fact emphasises the skill of learning to listen and respond to consumers’ and investors’ requirements, both of whom are crucial to the profitability of the company.We live in a tough business environment where gaining and retaining customers can be difficult. Many companies understand that solid profitability lies in sustainable development, and in order to keep their own CSR values intact, they must consider the implications of working with other companies that do not possess the same values. The other step to reach sustainable profitability is to add and communicate the positive values that socio environmental responsibility brings. Without communicating what companies actually are doing for both society and the environment, stakeholders miss out on the opportunity to make a conscious choice.Companies can’t rely simply on PR or marketing to boost their brand credibility. The information society we live in today requires both credible and transparent forms of communication, as it increasingly becomes easier for consumers and stakeholders to examine whether a company really lives what it preachesIt is important both to enhance the brand and to make a difference for people and society. CSP, Corporate sustainable profit probability, is about how companies can make CSR work profitably. If the company sets the CSR-concept in the business strategy, the positive effects will come spontaneously and the CSR course becomes even more sustainable and profitable in the long-run. Use of technological innovation to help the productivity also brings in material value. For instance, look at something as simple as a stove. A little company named First Energy Private Limited in Pune, India developed a $20.00 stove that produces three times the heat of conventional stoves and is virtually smokeless. It runs on pellets of compressed agricultural residue. Global sourcing is a strategic imperative; companies such as GE, Mercedes Benz and Apple understand this and have their global partners in place. The benefits of global sourcing are undeniable: it gives us access to a skilled and economical labor pool; lowers material and transport costs; and can speed up our time to market.
In simple terms and with reference to a business, sustainable growth is the realistically attainable growth that a company could maintain without running into problems. A business that grows too quickly may find it difficult to fund the growth. A business that grows too slowly or not at all may stagnate. The Sustainable Growth Rate (SGR) concept by Robert C. Higgins, describes optimal growth from a financial perspective assuming a given strategy with clear defined financial frame conditions/ limitations. Sustainable growth is defined as the annual percentage of increase in sales that is consistent with a defined financial policy (target debt to equity ratio, target dividend payout ratio, target profit margin, target ratio of total assets to net sales). This concept provides a comprehensive financial framework and formula for case/ company specific SGR calculations.
Google alone has invested more than $2 billion in clean energy to date, but shifting to exclusively renewable power is still a fraught prospect in areas with especially entrenched fossil fuel lobbies. Former Federal Chief Sustainability Officer Kate Brandt was hired by Google in July 2015 and “will be leading the development of [the company’s] sustainability strategy.”
Google has declined to comment on particular areas of focus for Brandt, who was appointed to her former role by President Barack Obama himself earlier this year. How Brandt’s policy expertise may be put to use in that quest, not to mention other green possibilities for Google’s massive building and data center portfolios, will be an area to watch closely in the coming months.When Google thinks about sustainability, one of the big areas that we think about is energy because that’s fundamentally a core piece of what drives our company,” says Rick Nee­dham, director of energy and sustainability of Google. Many of Google’s green investments have been tax equity investments, which allow companies to offset their liabilities with investments in clean energy. Google also claims credit as the first company outside of the traditional investors in the energy industry and on Wall Street to take advantage of the Investment Tax Credit and the Production Tax Credit, the most powerful investment mechanisms for solar and wind.Although Apple and Facebook are adopting more clean energy to power their US data centres, only Google has so far invested in projects not connected with its own power needs through tax codes.Google started reporting its emissions to the Carbon Disclosure Project in 2011. But its fight with carbon began in 2007 when Larry Page declared that the company would go carbon neutral and launched the company’s Renewable Energy cheaper than Coal (RE It is the opportune moment for the businesses to review the strategy for product and market diversification along with bringing in required efficiencies. Our product categories are very less in quantities. Our product items that are exported into foreign market are Shirts-60%, Jackets-11%, Knit items-10%, Trousers-7% and Others-11.50%. To survive in the worlds most competitive RMG market, we have to develop new product items with a lot of variations. It is time that the entrepreneurs must embrace the challenge to move up in the higher end in the value chain with introduction to product diversification. This will also make the businesses to be more creative in terms of skill enhancement of our workforce which will help bring in efficiency of the workers. The work place safety and security as per the requirement of international standard of compliance ensures the quality of work place. It may be mentioned here that a number of green factories have already started functioning with more new ones to enter. The green factories will enable the businesses to have better cost efficiency as this will improve productivity on one and reduce
the energy and raw material consumption.
A recent report published by Sourcing Journal indicates that the US apparel imports from Vietnam grew by at least 15 per cent year on year totalling $5.95 billion occupying the place next to China. Bangladesh squeezed past Indonesia to take the third place with a dollar value of exports of $3.1 billion accounting for 6.7 per cent of the apparel imported into the US growing annually at 8.5 in value. Exports to the US from Bangladesh fell by at least 37 per cent since the factory disaster in 2013 from $4.94 billion losing about $1.84 billion of business as of July 2015. A recent World Bank study states, if the RMG industry in Bangladesh is able to capture 20 per cent of China’s apparel export attrition, the former’s export volume will increase by around $29 billion, creating 5.4 million new jobs and 13.5 indirect employments. Experts point out that the government of Bangladesh should implement an effective policy for fulfilling the requirements of international buyers, the conditions of US Trade Representative (USTR), the standards of International Labour Organisation (ILO) and any of its subsidiaries, the requirements set by the bilateral and multilateral donors, and conditions imposed by importing nations in the alternate markets – such as, EU, Japan, Australia, Russia, Latin America, China and India. ‘Made in Bangladesh’ has become a household name in the global apparels retail outlets like WalMart, Marks and Spencer, Zara, Primark, HNM as we are the second largest sourcing country. The continuous effort and drive of the businesses in this sector whereby embracing the Sustainable Profitability model will not only ensure the omnipresence but make it a USD 50 billion plus exports a possibility in the near future. This achievement will also be a proper tribute to the victims of Rana Plaza and many more like them.