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The New Industrial Evolution: “Make (Ethically) In India”

Laura Quinn

By Gauri Sharma

The New Industrial Evolution: “Make (Ethically) In India”

India is all set to become the fastest growing economy in the world. China is slowing down, its wages are rising, and the world is turning toward India to replace it as the next manufacturing hub of the world. This rising demand for India’s abundant cheap labour, coupled with the Government’s “Make in India” and “Skill India” initiatives, is sure to make us the next global manufacturing powerhouse. This is it. This is our time.

But are we ready to face the environmental, social and ethical costs of a massive manufacturing-led growth?

The impact of industrialisation on China has led to its unprecedented economic growth in the last 30 years. This growth however, came at a cost - extensive exploitation of its workers, massive depletion of its resources, and environmental degradation.

China is far from the only victim of unregulated and unethical manufacturing. Most nations, while undergoing industrialisation, experience poor working conditions and irreversible disruption of the environment in order to establish themselves as cheap and quick-turnaround production hubs. The 2013 Rana Plaza collapse in Bangladesh brought this home to a global audience, a combined result of poor supply chain management by retailers, irresponsible garment manufacturers, exploitative contractors, and poor regulation by the government.

So history, including the Industrial Revolution, tells us that the natural trajectory of industrialisation involves exploitation of resources – both human and environmental.

But can we change that? Can we lead a new “Industrial Evolution”?

Think clean, dignified, happy factories. Less pollution. Energy conservation. Alternative sources of energy. Resource conservation. Recycling. Reduced waste. Reduced emissions. Living wages. Ethical production. Employee engagement. Worker welfare. Less attrition. Increased productivity. All ultimately tying back into improved business and value creation for all stakeholders.

It’s not a pipe dream, in fact far from it. Take Cummins Generator Technologies India's factory in Ranjangaon near Pune, India’s first ‘green’ factory inaugurated in 2008. Built using eco-friendly construction materials like recyclable aluminium and fly ash bricks, it has developed innovative solutions to reduce its environmental footprint including natural lighting and rainwater harvesting. Going green for this Cummins factory required an incremental cost of about 3-4% on the total build. This cost however, was recovered in 6 months, after which these initiatives have continued to add to the company’s bottom line.

However, individual companies or state governments driving change in pockets will not be not enough. Change is required across the entire manufacturing ecosystem. Government, civil society, buyers and suppliers can collectively drive an evolution by learning the lessons of China’s manufacturing boom to make India’s manufacturing ecosystem more sustainable in terms of labour, environment and resources. It’s a huge challenge to crack but here are some approaches that can contribute to a future of shared value for all.

Shifting from “auditing” to “understanding”

The key lies in altering the dynamic between buyers and suppliers - moving from an “authoritarian” to “collaborative” model that can overcome social and environmental challenges in factories, and integrate the long-term sustainability needs of all stakeholders. Buyers face long-term risks by ignoring kinks in their supply chains yet, on the flip-side, could benefit greatly from investing in transparent and ethical sourcing. In the 1990s, Nike came under attack for terrible labour conditions reported in its offshore factories (mainly in Asia). Along with intense backlash and reputational damage, Nike faced a 69% decline in profit in 1998, motivating it to undertake its own evolution to become one of the more ethical and sustainable brands in the world today.

Leveraging technology

Investment in new technology can enable manufacturers to monitor several “softer” sustainability indicators, such as worker satisfaction, comfort, and attitudes, in a way that can be attributed back to productivity, retention, and eventually financial benefit for all. By positioning themselves as ethical or ‘conscious’ manufacturers, suppliers can in turn gain significant competitive advantage and push a change in the broader ecosystem by showcasing the quantifiable impact of such an approach. LaborVoices, through its 24/7 SmartLine platform, is one such  technology that uses mobile phones to survey factory workers on working conditions and provides actionable feedback for suppliers and buyers alike.

Incentivising sustainability

In some cases, suppliers may fail to see business value or may not have the capital to meet social and environmental standards of global buyers. To overcome this, buyers could consider evaluating suppliers beyond commercial metrics and considering social and environmental parameters as well (such as reduced carbon emissions, improved working conditions) – and in turn reward them with low-cost financing, increased volumes, extended contracts for improved performance. Levi Strauss along with The World Bank, recently launched such an incentive program for its suppliers. The program will provide suppliers with low-cost financing from The World Bank’s International Finance Corporation (IFC) in exchange performance improvement across a range of sustainability and corporate social responsibility (CSR) metrics.

Educating and training factory workers

Continuous awareness programmes for factory workers on various issues such as labour rights and occupational health hazards have been shown to contribute towards preventing violations of their rights. Beyond awareness programmes, education and training on how to reduce environmental impact, increase operational efficiency and improve management skills, can go a long way in enhancing employee engagement, increasing worker productivity and ultimately reducing attrition. In 2007, GAP launched P.A.C.E, in partnership with suppliers and global and local NGOs, to provide life skills, education, and technical training to female garment workers. An evaluation of the P.A.C.E program in 6 factories (across India, Bangladesh, Vietnam, Cambodia and China) between 2009-13, revealed that on a global level, work efficacy rose 119% at the end of the program. In India, there was 49% greater retention among P.A.C.E. participants as compared to all female garment workers.

Collaborating with local organisations

By establishing collaborative partnerships with specialised and grass-root, community-based organisations, both buyers and suppliers benefit from better identification and understanding of region-specific or issue-specific challenges. Local organisations can help develop targeted solutions for these issues as well as implement value-add programmes within factories. In Mexico, HP collaborated with NGO CEREAL to tackle violation of workers’ rights, which eventually led to the establishment of an industry-wide labor complaints redressal mechanism. 

Sharing collective learnings

Manufacturers in India would benefit from sharing best practices, challenges and risks in sustainability. By giving their buyers, particularly global retailers, a more realistic view of the on-ground working conditions in factories, a standard and holistic policy for ethical manufacturing can be developed – enabling suppliers to have more implementable sustainability standards. Sustainable Apparel Coalition is one such global sustainability alliance of the textile, apparel and footwear industry for measuring sustainability and collectively addressing inefficiencies.

Igniting conscious manufacturing

The Government can lead the movement by making a public commitment toward ethical manufacturing and establishing standard guidelines for manufacturers. Globally promoting India as a conscious manufacturing hub can encourage companies to actively monitor their social and environmental impact while manufacturing in India.  

 

At a time when our country’s population is rapidly expanding, resources are fast depleting, and its environmental boundaries are being tested, it’s safe to say that the current manufacturing ecosystem will become increasingly unsustainable. India could be the nation that leads the way toward a new “conscious” way of manufacturing – and therein lies an incredible opportunity for the Government to re-imagine “Make in India” as “Make Ethically in India”.

 

Gauri Sharma is a Consultant at Do One Thing