Will CSR Survive Covid-19?

Industry responses to the perceived coronavirus threat have certainly separated the sheep from the goats in global sourcing.

The panic reaction of the sheep – driven by fear and short-term thinking – was to cut and run. Some retailers broke contracts for delivery of finished goods part-way through the manufacturing cycle, invoking ‘force majeure’ clauses and leaving suppliers holding stocks of unsaleable goods for which they had paid out materials and production costs. Suppliers facing bankruptcy as a result reacted by cutting jobs wholesale. Many thousands of migrant and informal sector workers have been left entirely without the means to sustain life.

Like Ashok in Kolkata who lost his job as a daily labour in the local industry that used to earn him 9000 rupee per month. In the last two months he has sold all his assets to survive. Now he has nothing left and no way to help his specially talented young son to pursue an education that could raise him out of his desperate social situation. He is totally reliant upon the help of friends and the communal kitchen established by Just Solutions’ regional officer, Nilambar Bhuinya, and his team to support local informal sector workers. (See our separate information on this work)

Relief for unemployed informal sector workers, Kolkata

And like the 21-year-old migrant worker who collapsed and died of exhaustion and electrolyte imbalance after walking 300 km from Hyderabad to Odisha when his factory closed and left him penniless.

Worst hit has been the ready-made garment sector and its highly dependent supply chain.  The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) reports that 1,150 of its member factories have reported covid-linked losses amounting to $1.18 billions from cancelled and suspended orders.

Even at the level of some global brands that previously espoused ‘corporate social responsibility’ goals, old divisions between the ‘business side’ (perceived as core business) and the ‘service side’ (perceived as optional) have re-emerged as cost-cutting efforts have cut a swathe through head office and regional staffs in CSR and compliance. 

The wiser ‘goats’ among the global fashion producers, realising that the ‘way back’ will require worker and supplier engagement and trust at an even higher level than in the past, have held good on their promises to suppliers. Industry leaders such as H&M were able to demonstrate strong support for their suppliers by paying for orders already signed and taking delivery of all production already ordered whether or not they expected to be able to sell the product.

These are the ties that bind.  When the sector climbs back out of the current recession and global markets begin to move again, considerable changes are predicted to patterns of consumption and in the production chains that support new demand. Those companies that stood by their corporate responsibilities to their suppliers during the bad times can expect to benefit from a level of trust among their suppliers and the workers who depend on them for their livelihoods.

It is likely that the current system of individualistic, scattered supply chains will give way to regional ‘clearing houses’ that will bring greater confidence to suppliers and buyers alike. This would also facilitate and simplify the compliance process that has taken a heavy knock during this downtime and move forward the consolidation that was begun by joint audit exchanges like Sedex, BSCI, etc.  Far from being a bolt-on ‘extra’ to the ‘core business’ of design, procurement and marketing, the CSR role may well be the discipline that will provide a clear path out of disaster.

But such far-reaching changes need to be built on a solid foundation of trust. Those brands that have demonstrated their corporate responsibility during these most testing of times and that base their forward strategies on the realisation of socially sustainable and equitable business plans are the best placed to benefit from the upturn.