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July 29, 2013 at 08:00 PM
While it’s hardly news that businesses are exposed to reputation and liability risk through suppliers, the factory collapse in Bangladesh in April has upped the ante considerably. Retailers in the United States and abroad found themselves doing damage control as the death toll topped 1,100 and company after company uncovered ties to the garment factories involved in the disaster. Responses differed from company to company, but people everywhere reacted furiously.
While there has been substantial outcry after providers of products like fruits and vegetables, tires or pet food have been targeted for harm they caused, the factory collapse may have taken public outrage to a new level. In a sign of the times, that outrage was focused through social media.
For instance, when Benetton denied any ties to the tragedy, photos of Benetton garments found in the wreckage went viral on the Internet. Similarly, when Walmart and the Gap declined to sign on to the Accord on Fire and Building Safety in Bangladesh, social media campaigns and online petitions sought to make the companies change their minds amid blistering criticism.
Many weeks later, the reputational damage continued to grow as not just the general public, but politicians and other retailers weighed in. Rep. George Miller, D-Calif., after touring some of the factories in Bangladesh where U.S. garments are made, said that retailers “have to make a decision now whether you want to have blood on your labels.” American Apparel CEO Dov Charney has gone on the record saying that retailers should pay workers more or get out of the business: “They shouldn’t be making clothing. If they can’t pay $50 a week, don’t make clothes.”
Where does this leave U.S. companies? Probably looking for reputation insurance, lest trouble online translate to trouble at the cash register. A recent Harris poll indicated that almost four in 10 U.S. consumers are now unwilling to buy garments made in Bangladesh. Caroline Sapriel, managing director of international risk and crisis management firm CS&A, pointed out that companies could end up paying a price for the cheap cost of manufacturing garments in factories there.
