The Chair (Mr. Dean Allison (Niagara West—Glanbrook, CPC)):
Pursuant to Standing Order 108(2), our study of corporate practices by companies supplying and manufacturing products in developing countries for Canadian consumers will get started.
I want to thank all our witnesses for being here today as we look at this issue.
We have with us, here in Ottawa, Peter Iliopoulos, who is a senior vice-president of public and corporate affairs with Gildan Activewear Inc. Welcome and thank you for being here.
Joining us via video conference from Toronto, we have Diane Brisebois, who is the president and chief executive officer of the Retail Council of Canada. Diane, welcome. It's good to see you again.
Then joining us from Vancouver, British Columbia, we have Peter Chapman, who is executive director of the Shareholder Association for Research and Education. Peter, thank you, and welcome to you as well.
Why don't we start with your opening remarks, Peter? Then we'll go to Diane for her opening comments, and then we'll finish off with the other Peter's remarks. After that, we will move around the room for questions for the remaining hour.
Peter, I'll turn the floor over to you.
A voice: Thank you very much—
The Chair: I'm sorry, I want to start with a video conference. We have two Peters—my bad.
Go ahead, Peter in Vancouver.
Mr. Peter Chapman (Executive Director, Shareholder Association for Research and Education):
That makes it all the more complicated, having two Peters.
My name is Peter Chapman. I'm the executive director of the Shareholder Association for Research and Education. SHARE is a Canadian organization that helps institutional investors integrate environmental, social, and governance factors into the investment process. We do this through research, education, and the provision of responsible investment services. Our clients are pension funds, foundations, and endowments, with assets under management of approximately $12 billion.
I would like to speak this morning from an investor perspective about the risks associated with global supply chains such as those that became apparent in last month's tragedy in Bangladesh. In a recent public statement by 15 global pension funds and fund managers, the Rana Plaza building collapse was characterized—as well as earlier incidents—as illustrating the significant reputational, operational, and legal risks that are ubiquitous in global supply chains. It underscores the urgent need for companies to know their suppliers, ensure compliance with safety standards, and fully disclose their supply chains.
My comments will focus in three areas. The first is the importance of corporate disclosure about sourcing practices and monitoring of global supply chains. The second will be the constructive role investors can play in aligning corporate responsibility and long-term wealth creation when environmental, social, and governance factors are considered in investment decision-making processes. The third is the positive investor response to the Accord on Fire and Building Safety in Bangladesh.
Shareholders depend upon the companies they invest in to manage risks related to supply chains. However there's relatively little disclosure by companies today about how they manage such risks. Improvements in disclosure will reduce investor uncertainty and assist investors in managing risks effectively.
To lessen the uncertainty that exists today, shareholders are seeking assurances that the companies they invest in have adopted responsible sourcing practices in their global supply chains, including performing human rights due diligence; negotiating commercial terms with suppliers sufficient to provide for safe, healthy workplaces and a living wage; establishing robust oversight of suppliers; and disclosing information on supply chain practices and outcomes.
To achieve this, clear and comparable reporting requirements by public companies should be established, including reporting on human rights due diligence. The most widely used such standard is the Global Reporting Initiative's sustainability reporting framework. Precedents exist for environmental, social, and governance—or ESG—disclosure requirements in other jurisdictions. For example, the Danish Financial Statements Act requires that the 1,000 largest corporations in Denmark—and all state-owned limited liability companies—report on CSR in their annual reports.
In addition to initiatives by governments, stock exchanges are also playing a role in encouraging greater corporate disclosure of ESG information. For example, in South Africa more than 450 companies listed on the Johannesburg Stock Exchange are required to produce an integrated report including information on social, environmental, and economic performance alongside financial performance. If they do not issue this integrated report, they're required to explain why.
More targeted disclosure is required in some jurisdictions. For example, the Transparency in Supply Chains Act of the State of California requires retailers and manufacturers with more than $100 million in worldwide gross receipts to disclose information on their websites regarding their efforts to verify that slavery and human trafficking are eliminated from their supply chains. Disclosure under this act is intended to assist consumers and investors in distinguishing between companies that are taking adequate steps to address these risks from those that are not.
Forced labour and trafficking are unfortunately still serious risks in some countries and industries—for example, in the harvesting of cotton in Uzbekistan.
In addition to these general disclosure requirements related to ESG issues, investors are urging that apparel brands, retailers, and manufacturers publicly disclose the names and addresses of factories used in the assembly of consumer apparel goods. Some companies have already taken this step.
In recent months the retail giant H&M has voluntarily disclosed the factories it uses, saying:
||...we can now incentivize our suppliers for taking ownership over their sustainability and recognize the progress they make. And we can take another step in making our industry more transparent and ultimately more sustainable.
The consensus is growing amongst institutional investors that ESG factors such as supply chain oversight are important components of risk management and a potential source of value creation over the long term. The draft high-level principles on long-term investment finance by institutional investors currently under discussion at the OECD are an example of the expression of widespread concern about the negative impacts of short-termism by institutional investors.
In spite of evidence that ESG factors can have a material impact on investment performance, some fiduciaries in Canada are reluctant to incorporate these criteria into their investment decisions because they fear doing so constitutes a breach of their duty to beneficiaries. Clarifying that pension fund trustees and other fiduciaries may consider environmental, social, and governance factors in their investment decisions will help align investors and publicly traded corporations in the pursuit of corporate responsibility, a step already taken in a number of jurisdictions internationally.
This position was supported in the 2007 “Capital Markets and Sustainability” report of the National Round Table on the Environment and the Economy, which states:
||Clearly, pension fund trustees must be made aware—perhaps via regulators issuing guidelines or, where appropriate, enacting regulations and/or legal changes by government—that considering ESG factors in capital allocation decisions is not in conflict with established fiduciary duties and that, in fact, not considering them may actually be a potential breach of such duty.
Fiduciaries and asset managers that evaluate plan investments with a full range of risks and opportunities in mind, including those related to supply chains of companies in which they invest, are better positioned to prevent losses and enhance gains. Governments can assist this process by providing a positive policy environment in this regard.
Finally, I'd like to turn to investor support for the Accord on Fire and Building Safety in Bangladesh. Recently, several international investor groups with combined assets of more than $2.5 trillion have welcomed the decision by apparel companies sourcing from Bangladesh to join the Accord for Fire and Building Safety in Bangladesh, and to work with the International Labour Organization and companies under this collaborative program to conduct robust inspections of the factories they use. We commend Loblaw Companies Limited for its leadership in supporting the accord.
The accord, which sets out a regime of independent inspections, public disclosures of the results, mandatory building renovations to eliminate hazards, and union access to factories to educate workers on their rights, is a major step forward for Bangladesh and provides the conditions for greater investor certainty that occupational safety in Bangladesh will be realized.
We believe that the dispute resolution mechanism in the accord sets it apart from previous failed attempts at voluntary programs in Bangladesh without imposing undue risks for signatory companies. The binding nature of the dispute resolution mechanism in the accord ensures accountability to the commitments contained in it. This accountability gives investors assurance that the signatories are committed to managing the risks associated with sourcing from Bangladesh.
In closing, I would like to thank the committee for this opportunity to participate in your deliberations on the important questions raised by the complex global supply chains of today's economy.
Ms. Diane Brisebois (President and Chief Executive Officer, Retail Council of Canada):
Good morning. My name is Diane Brisebois, and I serve as the president and chief executive officer of Retail Council of Canada.
Mr. Chair and members of the committee, thank you for the opportunity to speak to this matter. I apologize for not being present during the hearings, but as you may have been told, we are just a couple of days from our annual conference, so I had to remain in Toronto.
While my remarks will be short, I will be pleased to answer all of your questions.
Retail Council of Canada is a not-for-profit industry association representing more than 45,000 storefronts in Canada. Its membership includes independent merchants, regional and national chains, mass merchants, big box retailers, and online merchants. Its membership also covers all categories of retail, including general merchandise, grocery, and drugs.
The recent tragic factory accidents and horrific loss of life in Bangladesh have generated shock and outrage, but also a renewed commitment to action. The buyers of Bangladesh-made garments, apparel brands, retailers, and manufacturers recognize the responsibility to initiate action that will have an immediate, positive, and sustained impact on the safety and lives of garment workers in Bangladesh.
Our members believe that any successful effort to address the problem of building safety in Bangladesh will require support, shared responsibility, and action among buyers, factory owners, the Bangladeshi government, factory workers, and other stakeholders. Therefore, Retail Council of Canada is fully committed to working with these groups toward effective global solutions to the building safety problems in Bangladesh, which may also serve as a model to address such problems that may arise in other supplier countries.
Immediately following the tragic factory accident in Bangladesh, Retail Council organized several conference calls with all interested parties and also began to act as a hub for information on current and new initiatives. The role of Retail Council is to provide its members with information with respect to the various initiatives that have been proposed, including the Accord on Fire and Building Safety, and the North American Bangladesh worker safety initiative.
In partnership with other associations in North America, which include the American Apparel & Footwear Association, the Canadian Apparel Federation, the National Retail Federation, and the Retail Industry Leaders Association, RCC is working to develop a common framework for action and is also in the midst of surveying its members on their activities, including vendor codes and safety standards, in order to revise and develop industry guidelines for our members in Canada.
Garment industry jobs have been instrumental in helping or in moving forward the role of women in the economy and even within their own families in Bangladesh. It is important to continue to support the garment workers and to make significant contributions to workplace safety and to facilitate industry support for their economic empowerment.
We look forward to working with the Government of Canada in improving working and building conditions in developing countries. We also commit to keeping this committee abreast of our ongoing activities and progress in this area.
In closing, I give you our commitment that Retail Council will ensure that its ethical trading committee continues to be active, engaged, and assisting all members in the industry.
Mr. Peter Iliopoulos (Senior Vice-President, Public and Corporate Affairs, Head Office, Gildan Activewear Inc.):
Thank you, Mr. Chair.
Let me begin by expressing my sincere gratitude for the invitation to appear today. We have tremendous respect for the work of your committee. In particular, we are excited about contributing to your examination of the corporate practices of companies manufacturing products in developing countries for Canadian consumers.
My name is Peter Iliopoulos and I am the Senior Vice-President of Public and Corporate Affairs at Gildan.
I would like to start by giving you a brief overview of Gildan's operations.
We are a vertically integrated apparel manufacturer with our primary manufacturing hubs located in Central America and the Caribbean basin. In 2010, we acquired a vertically integrated manufacturing facility in Bangladesh, which is currently servicing our markets in Europe and the Asia-Pacific region.
As part of our vertical integration, we also conduct yarn-spinning operations in the United States. We employ over 33,000 people worldwide. We service our product in two primary markets. We sell T-shirts, sports shirts, and fleece in the wholesale distribution channel. Currently, we have the largest market share in Canada and the United States—ranging over 70% in each of these two markets. We've also expanded our product line to include socks and underwear in order to provide a full product line offering in the retail channel.
With respect to our operations in Honduras, which represent the most significant piece of our overall manufacturing production, we operate four textile manufacturing facilities, two integrated sock manufacturing facilities, and four sewing facilities, which are responsible for producing our activewear and underwear products.
In total, this represents a capital investment of over $500 million in the last five years alone. We have over 20,000 employees in the country. We established our manufacturing operations in Honduras because of its strategic location in servicing our primary market in the United States. Our experience has shown that there is a very skilled workforce in Honduras, resulting in the development of a strong, decentralized, local management team to run our operations in the country.
In Honduras, we can also leverage the CAFTA-DR free trade agreement, which provides goods manufactured in Honduras and the Dominican Republic with duty free access into the U.S. market. With Canada signing a free trade agreement with Honduras in 2011, we are looking forward to the ratification of that agreement as well, which will allow us to effectively service the Canadian retail market, particularly against competing Asian imports.
Our vertically integrated manufacturing facility in Bangladesh employs 2,000 people and represents less than 5% of our overall production capacity. Since our acquisition of this facility in 2010, we have invested over $1 million in building enhancements, the installation of a waste water treatment plant, and an upgrade of equipment. However, our experience in Bangladesh has proven to be difficult, with many outside forces and factors influencing the operational environment at our facility.
Our corporate social responsibility program, the Gildan genuine stewardship commitment, is based on four core pillars: people, environment, community, and product. CSR represents a key component of our overall business strategy, and we believe our practices position us as a leader in the industry. Our social compliance program includes a strict code of conduct based on internationally recognized standards, and it encompasses a very thorough audit process, which includes the conducting of independent and third-party audits at each of our facilities on a regular basis.
Our labour compliance program has been accredited by the Fair Labor Association since 2007. In fact, Gildan was the first vertically integrated apparel manufacturer to be accredited by the FLA. In addition, each of our sewing facilities has been certified by the Worldwide Responsible Accredited Production program. Since 2009, Gildan has been annually recognized by Jantzi-Macleans as one of Canada's 50 best corporate citizens.
The working conditions that we offer our employees at our worldwide locations include competitive compensation significantly above industry minimum wage; 24-hour access to on-site medical clinics staffed with doctors and nurses, seven days a week; free transportation for our employees to and from work; and subsidized meals. We are currently in the process of implementing a best-in-class ergonomics program in collaboration with the Ergonomics Center of North Carolina, which we expect to complete in Honduras by the end of 2014 and subsequently roll out in each of our other locations. Most recently, in the past year, we have inaugurated three schools for back health in Honduras.
To better integrate our production processes and corporate social responsibility practices in Bangladesh, we have leveraged our more than 10 years of experience in Honduras and have sent a team of skilled managers to train the local management team and help them integrate the Gildan standard. Amongst the many safety measures implemented in Bangladesh since the acquisition is the reinforcement of the building structure following the recommendations of an independent, U.S. based engineering firm; annual audits by third-party safety, loss, and prevention specialists; the installation of external fire escapes; and regular inspections and fire drills. In 2012 alone, over 1,300 hours were spent on training related to health and safety.
Overall, the working conditions that we offer our employees, which represent our greatest asset and success factor, are of paramount importance to us.
From an environmental perspective we have a strict environmental policy, environmental code of practices, and environmental management system. Similar to our labour compliance program, we conduct regular environmental audits at each of our facilities. We also operate waste water treatment facilities to ensure the water we discharge into public rivers is clean, as well as biomass steam generation to produce energy, resulting in a significant reduction of our greenhouse gas emissions.
From a community perspective our emphasis has been on partnering with the communities in which we operate with a focus on youth education and humanitarian aid. As one example, in 2005 we spearheaded the development of an industry-wide initiative for the creation of a technical school in Honduras. This represents a $1.5-million investment and has resulted in 6,000 students in the country graduating from this school.
With respect to product sustainability, we ensure that all of our products are OEKO-TEX Standard 100 certified, thus ensuring that no harmful chemicals or materials are found in their composition.
This has been a brief summary of Gildan and our CSR practices. I would like to conclude by addressing the role Canada should play going forward, in particular, in light of the recent tragedies in Bangladesh.
First and foremost, we believe Canada should play a leading role in corporate social responsibility by establishing mechanisms to ensure all products entering the commerce of Canada originate from manufacturers that adhere to internationally recognized labour standards, and health and safety practices, in working conditions. In fact, Canada has typically included labour agreements along with their free trade agreements.
Specifically, we ask that the Canadian government reconsider the existing duty-free access for Bangladesh under the least developed country tariff, as a means of pressuring manufacturers in Bangladesh to improve safety standards in the country to an acceptable level and to ensure that the country is in full compliance with internationally recognized labour standards. Take into consideration that Bangladesh is the second largest exporter of apparel to Canada, after China, and remains by far the largest LDCT beneficiary, with imports into Canada increasing by 27% in 2011 alone, to over $1 billion.
Furthermore, Bangladesh is the third largest supplier of apparel, by volume, to the United States, despite the fact that unlike in Canada they do not benefit from duty-free access, and notwithstanding the fact that many other apparel suppliers have duty-free access to the United States. In addition, local manufacturers in Bangladesh benefit from government subsidies relating to power costs and yarn purchases.
All of the above data supports the hypothesis that Bangladesh is the lowest cost global supplier of apparel, and the imposition of labour and safety standards will not hurt the competitiveness of the country as they can easily compete without tariff concessions.
In closing, I would like to once again thank the committee for this invitation. I look forward to your questions.
Mr. Paul Dewar (Ottawa Centre, NDP):
Thank you, Chair. Thank you to all our witnesses.
Chair, before I get into my comments, I note that we’ve had requests from other groups to meet. We've chatted about that. I look forward to making the opportunity for them to present if we can find time for another meeting on this very important issue that I think has seized many Canadians.
On March 25, 1911, there was a factory disaster, a catastrophe in the United States. It was the infamous Triangle Waist Factory disaster. It led to the changes in production of textiles in the United States and in Canada. It changed health and safety. It changed working conditions. In that infamous fire of 1911, 146 people were killed, mostly women.
April 24, 2013, will go down in history as another event that hopefully changed the world for the better, but as we all know now, over 1,100 people died, many of them women and children. On that day, a young girl, Tahmina Sadia, went to work. She didn't want to go to work. In fact, she asked to not go into the building. Reports said that she was slapped by her supervisor and told to go to work. She started working at 11 years of age because she had to. I say that because we're going to get into a lot of technical aspects about standards, which are important; protocols, which are important; and obligations, which are important. But I think it's important for people to go back and read the history of what happened in 1911 and what just happened in April.
This is about people. This is about people who, for reasons of survival, go to work in places they shouldn't have to go to work in. Let's remind ourselves of that.
I'll start with Peter in Vancouver.
We were the party that brought forward this motion for Foreign Affairs to study this issue because of its importance. I'm glad to see the government supported a study on this issue. On May 9, I wrote to our Minister of Foreign Affairs and asked if our government would call on the Bangladeshi authorities to guarantee respect for key labour health and safety standards as codified in the ILO agreements and conventions to which Bangladesh is a signatory.
I also asked him to engage with the international community to develop and implement a common response to holding the Government of Bangladesh accountable for what's just happened, in particular with response to the high-level ILO mission to Bangladesh, that they be a partner to push forward these provisions within the conventions that Bangladesh is a signatory to. I said that because I think Canada can and should play a role here.
You've made some points in your submission. What do you think our government should be doing? Specifically, what should our government be doing to work with the Bangladesh government, and the ILO and other international organizations, to ensure that girls like Tahmina will not suffer from this kind of exploitation? Also, that we do not abandon Bangladesh—no one wants to see that.
What should the Government of Canada be doing to ensure that we do our part?
Mr. Peter Chapman:
Thank you very much for the question.
From an investor perspective, it's very difficult to drill down and deal with individual companies, individual situations, when you hold a company in your common stock portfolio and own a very small fraction of that individual company. It becomes very difficult for investors to engage substantially and individually with many companies in their portfolios.
It becomes very important for investors to see international standards such as the ILO fundamental rights and principles at work, the core labour standards widely acknowledged and supported.
I think, efforts by the Canadian government to support Bangladesh, recognizing and implementing core labour standards, would be a very positive move from an investor perspective because it deals with systemic problems. Risk associated with Bangladesh is very hard to manage on a portfolio basis because individual companies, members of the Retail Council, will have sourcing from many different countries.
A broad, systemic approach to this is very helpful for investors. We also believe that international agreements to which Canada is a party, such as the fundamental rights of the ILO, are one of the bedrock standards for good, responsible investment.
Ms. Lois Brown (Newmarket—Aurora, CPC):
Thank you very much, Mr. Chair.
Maybe we'll get a chance to carry that on, Peter.
First of all, I'd like to say that our hearts go out to the families who have lost loved ones in this terrible catastrophe in Bangladesh. I was in Bangladesh four years ago. I met a lot of people when I was there and I would hate to think that any one of them lost a loved one in this catastrophe. Every one of us wants to see things improve there.
Bangladesh is a country that has great potential. They've done a lot of things right in the last 40 years, but there is still much to be done, so all of us can be participants in that.
I'm not an engineer, but I worked in the drafting department of an engineering company when I was putting myself through my degree. I had the opportunity to look at a lot of building code issues, and so out of my own personal interest I just took a look at where Bangladesh was at with its own building code. I understand that they adopted their first building code in 1993. They updated that in 2006 on the recommendation of the centre for fire science and technology at the Tokyo University of Science, so they've had some good input.
They have a lot of old buildings there, and in my observation, a lot of the rebar they use comes from old ships that have been sunk in the harbour, so probably the standard of rebar that we would expect here is not what we would see there. I also noted that in the magazine Popular Mechanics there was quite an article about why concrete crumbles, and some of the things that we look at here are just not the issues that we see in some of these emerging economies.
Peter, you were saying that when you go into a country you have—in Honduras perhaps this was alone—a U.S. based engineering firm that gives you a report on the buildings that you would go into. Can you talk about the process that you've used? How did you come to use this particular company? What do you look for and what would be your response to a report that's given to you by an engineering company?
Mr. Peter Iliopoulos:
When we acquired the facility in Bangladesh in 2010, as part of the due diligence process that we went through before closing the acquisition, we hired a very reputable U.S. based.... We did an extensive search and review to ensure that we had a very reputable engineering firm based on the highest level of standards, and we're looking at North American standards here. We had this firm conduct a detailed assessment of the facility that we were looking to acquire in Bangladesh.
They did a detailed review of the foundation, the structure, surveys. They looked at the plan, etc., in quite extensive detail, and they came back with certain recommendations. They concluded in this particular case that the building was safe, but they did come back with recommendations to improve the structure of the facility. That was part of our integration plan, once we did acquire the facility, to really implement these recommendations, reinforcing the concrete, adding reinforced steel to ensure that the building is safe.
I mentioned that of paramount importance to us is the health and safety of our employees. We employ 33,000 people worldwide, and we're not going to operate in a facility if we have the smallest of concerns that the structure is not safe. We went through a very extensive diligence process. We do similar-type processes in the facilities that we've constructed in Honduras, for example. That's really part of the process that we look to in terms of establishing either a situation where it's a greenfield project or we're building a facility from scratch, similar to what we did in Honduras, or in the case of Bangladesh, where we went through an acquisition.
Over and above that, what we do in Bangladesh on an annual basis is that we have a review done for safety and fire prevention, again by independent third parties, that come and review the facility to ensure that the standards are up to the highest level.
Mr. John Williamson (New Brunswick Southwest, CPC):
Thank you, Chair.
Thanks for being here today everyone.
Peter from Gildan, I'm going to start off with you because you mentioned the role of government and I'm concerned about this. I want to challenge you a little bit on that and particularly in terms of the Canadian government. Don't get me wrong, I think the responsibility for workers' rights and construction quality does rest with the government, but it's not the Canadian government. I don't think we want to be in the position of policing the actions of nations around the world in a global economy.
Frankly, this sounds like business, which generally looks for greater freedom to conduct its business, now scurrying for government protection to double-check or review when things do go horribly wrong. I think labour organizations, and workers, and politicians in Bangladesh have to do their job to improve their safety. I don't see the need or the value for the Canadian government. This begins, depending on how far it goes, to sound more and more like a non-tariff barrier that would potentially protect some at the expense of others from bringing in goods from overseas. At home I think it's up to consumers.
I want to challenge you on that because it's opening up quite a role for the federal government, and if you follow some of the other arguments that are made here, potentially the provincial governments as well. I'm happy to hear from others on this, but I do want to bat that right back at you. Why is it the responsibility of government to review the actions of your firms and others that are choosing to operate in these countries?
Ms. Hélène Laverdière (Laurier—Sainte-Marie, NDP):
Thank you very much, Mr. Chair.
Thank you to our three witnesses for being with us today following the terrible tragedy in Bangladesh.
I would like to start with a comment. Listening to all three of you, I was struck by the fact that there is a general consensus. In fact, I will repeat what you said. You stated
that we need to work together; that we can't do it in isolation.
There truly is a consensus that everybody must work together, be it the industry, the government, international organizations, the unions, civil society, investors or consumers. I find that very striking. It is simply a comment I wanted to make.
The government has cut the funding it provided to the Corporate Social Responsibility Centre of Excellence. The centre is now funded only by the industry, which puts civil society in a bit of ambiguous situation. It therefore decided to withdraw. It seems to me that things are moving in the exact opposite direction to the consensus here, which is that all players need to work together.
Now, I do have a quick question for you, Mr. Iliopoulos. I would like to congratulate you on all the work you have done in terms of corporate social responsibility and on your achievements. You said that you have built three schools in Honduras. Did you build them using your own funds?
Prof. Chris MacDonald (Director, Jim Pattison Ethical Leadership Education and Research Program, Ted Rogers School of Management, As an Individual):
Thank you, Mr. Chair.
I'd like to thank the members of the committee for this chance to speak to you today. The Jim Pattison ethical leadership program and the Ted Rogers School of Management appreciate the opportunity.
I want to make clear at the outset that I do not represent any constituency or interests. I'm neither primarily a critic of business nor a defender; nor am I particularly attached to any industry or sector. I'm a philosopher by training and a professor of business ethics. It is from the point of view of someone concerned with understanding the role of ethics in business quite generally that I speak today.
The role of ethics in business is not to render business saintly, nor is it to cure all that is wrong in the world. Neither is it to be mere window dressing, mere pretty words, or platitudes mouthed to make us feel better. The role of ethics in business is to act as a moderating force, in an attempt to make sure that the net benefits of our economic activity are positive and that fundamental rights are respected along the way, to mutual benefit.
If business is, roughly speaking, the set of practices related to making things and providing services for others in return for money, then ethics is about finding reasonable limits on those practices. Ethics in business is, in other words, an attempt to civilize a rough but productive game. Just how to do that is seldom obvious.
With regard to the subject matter of today's meeting, I have three questions to pose, questions to which I will suggest answers. I will then have three recommendations to make.
First, do Canadian companies have an ethical obligation to go beyond the legal minimum required by the governments of the countries in which they operate?
The answer here is clearly yes. Adherence to the law is seldom enough to guarantee that a company or individual has met all relevant ethical obligations. Even in well-governed countries, the law protects only the most central of interests and is further limited by what is feasible to prohibit or to require. Ethics, embodied in a wide range of moral responsibilities, often goes much further and can offer guidance beyond what is feasible for even thoughtful and thorough regulations.
This is nowhere truer than in the world of commerce. In business, opportunities to take unfair advantage are common, and regulation can only go so far towards remedying this. Government cannot be everywhere, and if it could be, we wouldn't want it to be. So responsible companies seek to go beyond the letter of the law both because it's the right thing to do and to forestall being the target of additional, potentially burdensome regulations.
This responsibility to go beyond the dictates of the law is of special significance in developing countries with underdeveloped legal and regulatory systems. When operating at home, Canadian companies can, and with some justification, take the following stance: let government set the rules and we will play by them. In a country such as Canada, we have capable if imperfect regulatory agencies that enjoy the benefit of the finest in technical expertise on a broad and affluent tax base.
Other countries are not so lucky. In countries marked by a deficiency or absence of regulatory capacity, or in which governments are indifferent or even antagonistic to the well-being of their citizens, companies do not have the luxury of assuming the kind of moral division of labour that characterizes commercial life in industrialized democracies. Indeed, I think the burden of proof rightly rests on the shoulders of companies that do business in faraway places to assure themselves and Canadians that they are being particularly responsible in under-regulated contexts.
Here is my second question. Should Canadians expect companies operating in places like Bangladesh or China to adhere to Canadian labour standards?
The answer here is no. Perhaps no one really expects Canadian companies doing business in developing nations to implement fully Canadian or western European standards, but the point is worth making, nonetheless.
To be blunt, Canadian workers enjoy high pay and high labour standards because we can afford them. Other countries are not there yet, but the fact that their labour is cheaper is precisely what attracts foreign business and foreign investment to their shores. Insisting on Canadian standards for developing nations would be deadly both to national economies and ultimately to the employment prospects of the citizens of those nations.
But there are a few things that Canadians can rightly expect of Canadian companies operating abroad. First, they can reasonably expect Canadian companies to respect and to an extent to promote the fundamental human rights of those employed within their extended supply chains. No one should tolerate slavery or other forms of forced labour. No one should accept corporate practices that restrict freedom of association or freedom of expression or that involve collusion with despots. Human rights represent a line in the sand.
Second, Canadians also have the right to expect companies that fly the Canadian flag to behave in a way that reflects well upon Canada as a whole. While there is no obligation in business to be a saint, there is nothing wrong with wanting Canadian companies to be part of an upward trend rather than of a race to the bottom. Canadians have, in other words, the right to expect Canadian companies to take a leadership role where possible on the international stage.
My third question is as follows. Given the concerns shared by many Canadians over the regrettable working conditions and risks recently highlighted by the tragic events in Bangladesh, what's the best way for Canadians to contribute to the well-being of those in factories abroad?
It is to the credit of Canadian consumers that they show considerable concern for the lives and fates of workers in faraway places, but Canadians are divided on how best to act on their concerns. The most fundamental way in which Canadians can help, of course, is to buy goods made in countries in which the economy badly needs the help. The thing that will ultimately raise wages and safety standards in developing nations is competition driven by demand. This is why boycotts are unhelpful to the point of irresponsible, as I think are campaigns aimed at promoting the exclusive purchase of goods made in Canada.
The second way Canadians can help is through charitable donations, for instance donations to organizations that do humanitarian work, but especially to NGOs that can act as third-party verifiers and certifiers of corporate supply chain practices. Canadians can also usefully support organizations that work to promote greater education, and hence, productivity in developing nations. Greater productivity generally means higher income. Perhaps most fundamentally, Canadians can contribute to organizations that seek to promote good governance and to fight corruption, since corruption and poor governance are liable to play a crucial role in allowing labour conditions to deteriorate.
The final thing Canadians can do is to continue paying attention to this issue, and to continue encouraging Canadian institutions of all kinds to work towards making things better. The Canadian government, Canadian businesses, and Canadian NGOs all have a role to play in encouraging and offering guidance on the pursuit of incremental improvements in working conditions.
Lastly, I have three principles to put before you very briefly. I hope these will be recognized as flowing from what I've already said.
One, Canadian companies should adopt progressive standards for workplace health and safety wherever they operate and should expect the same from the companies with which they do business. They should look diligently for cost-effective ways to keep workers safe and well treated throughout their supply chains, and they should be transparent about the standards they adhere to, whether those standards are unilateral or the result of collective action. The Government of Canada should encourage and facilitate such behaviour.
Two, Canadian companies should respect and promote human rights. Where that cannot be done, Canadian companies must not operate. The Government of Canada should encourage and facilitate such a standard.
Three, Canadian companies should help to spread Canadian know-how in areas such as governance and anti-corruption, and should promote, wherever they go, both the ethical and commercial importance of the rule of law. The Government of Canada should encourage and facilitate that commitment.
In conclusion, improving the lives of workers in developing nations is not a straightforward task. Economic development is the key, and economic development cannot be legislated. Canada needs a balanced policy that encourages Canadian companies to invest in and do business with developing nations but to do so in ways that both respect human rights and make reasonable steps towards continuous improvement in working conditions.
I thank the committee again for this opportunity to speak.
Mr. Bob Chant (Senior Vice-President, Corporate Affairs and Communication, Loblaw Companies Limited):
My name is Robert Chant, and I serve as the senior vice-president of corporate affairs and communications at Loblaw Companies. Included among my duties is leading our corporate social responsibility initiatives, including community investment and charitable giving.
Mr. Chair, thank you very much for the opportunity to speak to this matter.
On behalf of the entire Loblaw organization, I'd like to first extend, once again, our sympathy and our thoughts and our prayers to the victims and families who lost loved ones in the tragic building collapse in Savar on April 24.
At Loblaw, we have a very robust social responsibility regime and a strong commitment to ethical sourcing that includes vendor agreements that require inspections—audits, if you will—of our vendors' facilities, including the one in Savar. Clearly, it wasn't enough to ensure safe working conditions in this case. Frankly, it has not been industry practice to audit the structural integrity of the facilities our vendors use—clearly it should be.
In the hours following the collapse, we determined we had production occurring in the building. That day we informed the media, our employees, and our customers, and gave our commitment to keep them apprised as the situation developed. We were obviously shocked and deeply saddened by this senseless tragedy. We began to take immediate action with local authorities, with the Canadian government, with the Department of Foreign Affairs and International Trade, and with industry to determine how we could help. Our executive chairman, Galen G. Weston, publicly committed to a plan of action, which I'd like to discuss with you today.
It involves creating and funding a relief plan for victims and their families, establishing a new standard at Loblaw for our control brand products—those are our private label products—and enforcing that standard with Loblaw people on the ground in Bangladesh and across the region. Our approach is a combination of actions, both specific to Loblaw and related to our participation in broader industry initiatives. We believe this is the right approach for us as we work to drive lasting change in countries like Bangladesh.
Please let me elaborate further on how we are executing our commitments.
In the days after the tragedy, a team of senior Loblaw executives travelled to Bangladesh. I was part of that team, and I can tell you it was critical for us to go, to learn first-hand about the situation, and to be able to determine how to deploy resources in a manner that means the most to the Bangladeshi people. To that end, we have committed to a three-pronged relief program for the victims and their families to provide support now and in the future.
This includes, first, direct financial assistance. In working with labour, industry, and government, we will be particularly focused on ensuring that the money reaches those who need it the most: the families and the victims.
Second is rehabilitation for injured workers. We will provide support for injured workers through a local rehabilitation hospital in Savar to aid the recovery of injured workers, and when possible, their re-entry into the working place. I was pleased to see that Carolyn Scott, who's associated with that hospital, is here today as an observer.
Third is a community-based program with Save the Children Canada and Save the Children Bangladesh, which will provide life skills education, and workplace support for garment industry workers and their families, particularly in the Savar area of the capital city of Dhaka. Helping victims and their family members find and hold a job is a critical piece of the recovery process, because jobs in the garment industry help improve the quality of life of the people of Bangladesh. It has been well documented that of the nearly 4 million garment industry workers in Bangladesh, the vast majority are young women.
Garment industry jobs have been instrumental in bolstering the role of women in the economy and even within their own families. As The Globe and Mail
's south Asia bureau chief, Stephanie Nolen, wrote recently:
||Women with jobs and income get a bigger voice in their family decisions; their children go to school, get vaccinated.
Amit Chakma, the president of the University of Western Ontario and a native of Bangladesh, also commented that the most significant contribution of the garment industry “is the economic empowerment of a vast number of women by providing them with a source of income”. That's why we have committed to keeping our apparel production in Bangladesh. Our chairman said the apparel industry can be a force for good by staying and improving workplace conditions. We believe that properly inspected, well-built factories can be an agent for economic development and stability in countries like Bangladesh.
To drive that forward, we have undertaken two very important initiatives. First, we have signed on to the Accord on Fire and Building Safety that will establish a program that strives to protect workers from fire, building collapses, and other accidents. It sets out specific timelines for remediation of facilities, requires the cooperation of the signatories, and will make audits publicly available. But its overarching purpose and mission is to protect the workers not only from further disasters but also from income interruption while remediation work takes place on the factories that require remediation.
In addition to the accord, we have established our own Loblaw standard that states that Loblaw control brand products must be made in facilities that respect local construction and building codes. Vendors that want to do business with Loblaw must comply. To increase our visibility to, and ensure compliance from, our vendors, we will have Loblaw people on the ground in Bangladesh and the region in general to work with our suppliers and regularly visit factory sites. They will report directly to us and work to ensure that goods produced for sale by us were made in an environment that reflects Canadian values.
Twenty years ago the international apparel industry aligned with local governments to address the issue of child labour. Through a collaborative effort tremendous progress has been made. We must come together again to ensure the poor structural integrity that led to this unspeakable tragedy in Savar does not happen again.
In closing, l'd like to thank the officials at the Department of Foreign Affairs and International Trade who worked with us in Bangladesh and here in Canada. In particular, I would like to thank Heather Cruden, Canada's high commissioner to Bangladesh, and her terrific team for the support and engagement that they provided us before, during, and after our visit. I've been in touch with them every day since our visit. They've been absolutely tremendous and were essential and integral to the success of our trip. Canada can be very proud of the work they're doing.
We look forward to the Government of Canada's continued participation with industry on improving working and building conditions in developing countries. l'd also like to thank the membership of the United Food and Commercial Workers and the Canadian Labour Congress for supporting us in our response to the tragedy and in our participation in the accord.
One message we received loud and clear from the day we arrived in Dhaka was, please don't leave. To the Bangladeshi people, we want you to know that we hear you, and we'll work with you to drive positive change in the apparel industry.
Mr. Bob Chant:
That's a very good question, and it's a tough question to answer.
I'll start by reflecting on the comments that our chairman, Mr. Weston, made at our annual general meeting a couple of weeks ago, in which he said very clearly that he was troubled by the fact that we participate in a culture—or wondered what our contribution is to a culture—that would force people back into a building that had been declared so unsafe. It is very unclear to us why that happened, other than that there was a lack of enforcement of the local laws.
I would suggest that this is a common theme that you'll hear from me today. I'm not by any means trying to place any undue responsibility on local authorities, because we certainly recognize our responsibility in this instance and in general terms. But I believe there is a fundamental lack of infrastructure in Bangladesh that makes very difficult the enforcement of both existing labour laws that are in place today....
I can't say I'm an expert on them, but I certainly have talked to enough people over the last few weeks to be comfortable in saying that there are reasonably good labour laws in place in Bangladesh, and we're looking forward to the labour law reform package that I think is to be brought forward in June.
But fundamentally, there exists a culture that would allow this to happen.
A combination of increased inspections and of their intensity and the presence, in the case of Loblaw, of people on the ground on a frequent basis; the demands that buyers can place on and will place on our suppliers—both our vendors or agents and the factory owners, whom we sometimes deal with directly, and sometimes we deal with another.... Ultimately, the factories will feel that pressure, combined with improved infrastructure and inspection capabilities.
I'll mention a meeting that I had—
Mr. Bob Chant:
That's a multi-pronged question, so bear with me.
I've travelled in that part of the world to a certain extent, so I wasn't particularly surprised by what I saw. My immediate reaction was what I expected, which was very high-density populations. There are a lot of people in a very small area. That's true for the entire country. I heard, over and over again, that one of the biggest challenges is that property is either extremely expensive or difficult to acquire, and therefore you get expansion this way, not this way. People were expressing that to me in explaining why this particular facility had been built the way it was and why that seems, not to be a common thing but something that happens regularly.
I did not visit the site of the tragedy. My colleague did. By the time we were there, to be honest with you, most of the reclamation had occurred. But he did visit the Centre for the Rehabilitation of the Paralysed in Savar, which is the hospital I was speaking to. He was very moved by the work that was being done, by the visits he had with people who were severely injured. My immediate thoughts go there.
As I mentioned in my opening remarks, virtually every person I spoke to, whether it was in the Bangladeshi government or industry, NGOs, whoever I was talking to, all asked us not to leave, or congratulated and thanked us very much for not withdrawing because that would be the worst thing we could do. They also said, some of them on the side, that the Government of Bangladesh is not capable of solving this problem on their own. Industry has to step up. We have perhaps the best opportunity to exert influence on the factory owners and the industry on the ground there to ensure very quick action is taken.
If you look at the terms of the accord, the inspections would take place during a fairly lengthy time period. Our company has decided we're going to undertake inspections, including building integrity inspections, hopefully in 60 days, at maximum 90 days, so we will be able to provide that information to the accord, the group, and that information will be transparent. If the 40 members of the accord act that quickly, we should get most of the factories inspected, and at least identify the high-risk challenges.
Mr. Bob Chant:
I'll try to be brief.
First of all, we are a grocer, primarily, and the apparel business is part of our business. It's not the main part of our business. Our approach to product procurement is that we source from vendors—not produce it ourselves—in almost all cases. That's our overall approach.
We were shaken to our core, I would say. We take this very seriously and I think are responding accordingly. As I said, and this isn't to share blame, the industry did not think to inspect for building integrity. We don't do it in developed parts of the world and even in developing parts of the world. So this is new, and unfortunately it required something of this magnitude to get us to collectively act, but it's on the radar now, and as quickly as we can get this fixed, it will be fixed.
But it is going to take some time and it is going to take the collective efforts of everyone: labour, government, business, NGOs, everybody. The Canadian government, the Bangladesh government, the U.S. government, the British government, everybody.... But I firmly believe, having chatted with I think everybody who we possibly could have talked to over there, that we can solve this and in fairly short order. The political situation in Bangladesh, the social conditions, and the culture there are an enormous challenge, but I think it can be addressed.