KMART and Target owner Wesfarmers has dropped some of its suppliers in Bangladesh following the garment factory collapse in that country in April, says director Diane Smith-Gander, reports The Australian newspaper. ‘They’ve made some decisions not to continue to source in particular markets where they couldn’t be comfortable the building codes were going to be safe,’ Smith-Gander said in an interview with The Australian, ahead of a keynote address to the Governance Institute in Perth tomorrow.
She said the Perth-based conglomerate, which owns Coles, Target, Kmart and Bunnings, had cut back on some of its suppliers after they were found to be operating in ‘inappropriate premises’.
‘Wesfarmers has an ethical sourcing formula that operates across all of the businesses,’ she said. ‘For a long time, Wesfarmers businesses have been very careful about labour relations and not having any indentured labour and not having underaged labour and other workforce conditions.
‘But the issue of factories being in buildings that are not built to take that sort of economic activity was something that, unfortunately, only really came to the fore with the Rana Plaza tragedy.’
More than 1,100 workers died in the Rana Plaza building collapse at Savar in April. Kmart was mentioned in a Four Corners program on factory conditions in the country.
Smith-Gander said Wesfarmers executives went to Bangladesh following the collapse and audited the premises of thousands of suppliers to all their businesses.
‘If they are in inappropriate premises, they are delisted as a supplier,’ she said. ‘Some suppliers will no longer be on the approved list until they have relocated their factories to ground-floor appropriate locations.’
Wesfarmers chairman Dr Bob Every told the recent annual meeting in Perth the company had decided not to stop buying all garments made in Bangladesh as the industry employed four million people, with up to 20 million depending on the income it generated.
He said businesses such as Wesfarmers needed to ‘provide a pathway out of poverty and unemployment, particularly for young women’, but the company had to make sure people working in the factories that supplied garments to its companies, such as Kmart and Target, were safe and were treated properly.
Smith-Gander, who has recently become chairwoman of Transfield Services and is a board member of the Perth-based CBH Group of companies, said boards needed to take responsibility for a broader range of ethical and governance issues than just choosing the right chief executive and setting the company strategy.
She said directors should look at the ethics of the companies and groups they did business with, from suppliers to sponsored sporting events.
Companies had to look downstream to suppliers and upstream to the companies they did business with
to make sure their practices were ethical.
‘These days businesses are very integrated,’ Smith-Gander said. ‘There is a chain that flows through, and anyone who believes they can set boundaries around themselves is foolish.
‘You have to see yourself as part of an integrated chain, and you have to accept that what goes on downstream of your piece of the chain and what goes on upstream of your piece of the chain is going to impact your reputation.
‘Your governance and your management systems need to be robust enough to live in that new interlinked environment.’
Smith-Gander said the case of Tour de France winner cyclist Lance Armstrong, who was involved in a scandal over performance drugs, and the problems with the Australian swimming team had shown there were risks for companies that sponsored sporting teams. A former chair of the board of Basketball Australia and the Australian Sports Drug Agency, she was critical of the governance standards of some sporting bodies in Australia.
‘Our governance in sport is not strong enough in this country to be able to manage the risk profile of sport today,’ she said.
‘Everyone in Australia wants to be involved in sport in some way. You have a great desire to be involved and to be engaged. You have a large amount of money and you have celebrity. You put that all together, and you have an explosive mix. The governance has to be of a really high order.’
Ms Smith-Gander said the boards of sporting bodies should be regularly refreshed and have a diversity of members, as with corporate boards. ‘There’s a long way to go on sporting boards,’ she said.
‘This is one of the areas where all the governing bodies need to lean in very hard.’
-With New Age input
