Nike Inc. cut ties with its manufacturing partners in Bangladesh last year and created a “country risk index” to score the potential downside of doing business in certain locations.
Last year, a group from Nike visited the building in Bangladesh that housed supplier Lyric Industries. They found it littered with fabric, windows were bolted shut and workers were cramped on the eighth floor.
A year ago, Rana Plaza, an eight-story commercial building, collapsed in Savar, a sub-district in the Greater Dhaka Area, the capital of Bangladesh. The death toll was 1,129, with at least 2,515 people injured.
Five months before that, a fire at a clothing factory in Tazreen, Bangladesh killed 112 workers.
Nike wasn’t connected to those tragedies.
But the company decided after its site visit that outsourcing production to Bangladesh could not easily be fixed or monitored. It cut all ties to Lyric Industries, keeping only its factories in modern buildings in Bangladesh’s export-processing zone.
Nike then created a “country risk index” that would help it evaluate the costs of doing business in certain locations. Bangladesh ranked near the bottom.
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.