In First Interview Since Bangladesh Factory Collapse, Benetton CEO Confirms Company's Tie To Tragedy

KIM BHASIN

In his first interview since the deadly collapse of a garment factory complex in Bangladesh, the chief executive officer of Benetton told The Huffington Post that his company had purchased small quantities of shirts from a manufacturer that operated inside the plant.

Chief executive Biagio Chiarolanza said Benetton bought the shirts from a company called New Wave Style, which operated one of the several garment factories inside the Rana Plaza building. The collapse of the building in an industrial suburb of Dhaka last month took the lives of more than 800 people.

“The New Wave company, at the time of the tragic disaster, was not one of our suppliers, but one of our direct Indian suppliers had subcontracted two orders,” said Chiarolanza, speaking via phone from Italy, where Benetton is based.

One of Benetton’s suppliers in India had issues fulfilling orders, and offered the option to relocate a portion of its work to several manufacturers located in Bangladesh, according to a Benetton executive who spoke on condition he not be named. New Wave was one of those manufacturers.

Benetton decided to stop production with New Wave one month before the deadly collapse occurred, due to the manufacturer's inability to meet “strict” quality and efficiency standards, Chiarolanza said.

Chiarolanza, a 20-year Benetton veteran who became CEO in 2010 after spending seven years as head of operations, said his company plans to continue to use factories in Bangladesh to manufacture its wares, asserting that the welfare of workers in poor countries is best served by providing jobs.

"It's not the solution to go outside from Bangladesh or to think in the future we can leave Bangladesh," said Chiarolanza. "I spent some period of my life in this part of the world, and I believe -- I really believe -- Benetton and other international brands can help these countries improve their condition. But we need a safe and happy working environment and we need to have better conditions."

He emphasized that Benetton’s orders from New Wave were relatively small, totaling around 200,000 shirts, and were issued in December 2012 and January 2013. Chiarolanza's account confirmed documents previously obtained by The Wall Street Journal.

The shirts were made inside the Rana Plaza building, shipped to the supplier in India and then distributed through Benetton’s "entire distribution network," Chiarolanza said, though he didn't disclose the locations of retail outlets where the clothing eventually landed on shelves.

His explanation came as an attempt to clarify Benetton’s connection to the Rana Plaza disaster in the face of confusion and considerable criticism from labor groups, who have accused the brand of profiting at the expense of low-wage workers in poor countries. For a company that has marketed itself with the slogan “United Colors of Benetton” -- a seeming nod to multiculturalism -- the association of its brand with unsafe sweatshops has been particularly uncomfortable.

In its first statement following the collapse, the company claimed that "none of the companies involved are suppliers to Benetton Group or any of its brands." On April 29, as photos from the Associated Press revealed Benetton labels amid the rubble, Benetton acknowledged it had placed a "one-time order" from a manufacturer in the building. The following day, the company said one of its suppliers had "occasionally subcontracted" orders from a shirt-maker at Rana Plaza.

Benetton blamed the confusion on the complexity of its supply chain. The company operates in 120 countries across the globe and works with 700 manufacturers, and suppliers often subcontract work when necessary. It took time to go through all the records and come across the orders made from the Rana Plaza factory, the company claimed.

Chiarolanza's account effectively enhances the image of an enterprise so huge that no one could possibly keep tabs on all of the hands that touch its product -- some of them operating in unsafe conditions beyond the scrutiny of regulators.

According to the Benetton executive, the company commissioned an assessment of New Wave prior to placing its order. That assessment included checks on the manufacturer's ability to meet quality standards and fulfill the order on time, and it looked at issues related to working conditions and safety. Benetton requires that all of its manufacturers sign a code of conduct addressing myriad issues of concern, from child labor to discrimination in hiring and firing practices, he said.

However, the Benetton executive added that the company never conducted a so-called social audit of New Wave -- essentially, a deeper look at the manufacturer's labor conditions and workplace safety -- because Benetton had worked with the supplier for a very short period of time.

The Rana Plaza disaster has renewed the focus of labor groups on the process of social audits, with critics portraying the measures as little more than public relations devices: Companies effectively check off a box that such audits have been conducted without mounting genuine probes aimed at turning up trouble.

Spanish apparel retailer Mango, which had planned to buy samples from one of the contractors at Rana Plaza, confirmed in a statement to The Huffington Post that it had not conducted a social audit either, because it did not yet have a "commercial relationship" with the factory. The company noted that it wouldn't have been able to identify the building's structural problems regardless.

Benetton claims it didn't know the factory building was constructed without appropriate safety permits. According to the company, documentation provided by local government agencies showed no signs of foul play or incorrect building permits there. All the information given to Benetton was completely "in line," the company said.

Chiarolanza said the tragedy has prompted Benetton to add "additional items" to its assessment process: Going forward assessments will more intently examine the structural integrity of the buildings where its products are made.

Between 2 and 4 percent of Benetton’s products are made in factories in Bangladesh, according to the company. Benetton directly manages about half of this production, while relying on outside suppliers -- mostly in China -- for the rest.

Among the reasons Chiarolanza cited for opting to remain in Bangladesh is a need to maintain operations in multiple regions, giving Benetton the capability to quickly produce and deliver products to retail outlets worldwide.

Other countries, such as Laos and Egypt, offer very cheap labor, Chiarolanza said. But Bangladesh presents the best place to make T-shirts and other simple items that are shipped off to large Asian markets nearby, such as China.

"In Tunisia, where we have a direct company-owned factory, we can produce more or less at the same cost," Chiarolanza said. "It's better to divide the production in some countries and factories, so we're nearer to, for example, Asian markets, so we can deliver directly."

Benetton is in talks with the International Labour Organization, which brings together producers, trade unions and NGOs in an attempt to get all stakeholders on board with change in the apparel manufacturing industry, including in Bangladesh. "I can assure everyone that Benetton has always paid special attention to the workers condition, and the environment in which they operate. I believe our long-standing commitment to social issues speaks for itself," said Chiarolanza.

But labor activists remain skeptical of Benetton's commitment to aiding the workers of Bangladesh. Scott Nova, executive director of the Worker Rights Consortium, an independent organization that monitors labor rights, demanded more than promises.

"If Benetton is serious about preventing future accidents, they will sign a binding, enforceable agreement that requires them to pay for the repairs and renovations needed to make their factories safe," said Nova. "They have made no such commitment and given their track record of public dissembling since the collapse, people can be forgiven for not taking them at their word."

Benetton affirmed its stance on wages in Bangladesh: a low wage is better than no wage at all. Chiarolanza argued the wages provide an opportunity for advancement, particularly for women, since the vast majority of workers in garment factories are female. Nova, though, doesn't accept the status quo in the poverty-stricken nation.

"The wages in Bangladesh are an act of cruelty," he said. "Women cannot support their families on $40 a month. Yes, unemployment is worse, but that is no justification for paying sub-poverty wages that are half of the wages in the next lowest-cost country."

First posted in The Huffington Post, May 09, 2013

Kim Bhasin is a Senior Retail Reporter at The Huffington Post. He previously worked at Business Insider. Kim.Bhasin@huffingtonpost.com