As Chinese Manufacturing Shifts Inland, Social Compliance Declines

10/4/2013
AsiaInspection released the AsiaInspection 2013 Q3 Barometer, a quarterly synopsis of manufacturing and the quality control services industry.

North American importers drive surge in social accountability
Since the Rana Plaza Factory collapse in April 2013, AsiaInspection figures show a +52 percent increase in Factory Accountability Audits throughout Asia for Q3 2013 compared to Q3 2012 and a +167 percent spike in Bangladesh. This growth has been sustained throughout Q3 with September seeing the biggest demand for Audits AsiaInspection has ever seen. Demand has increased the most from North American importers, up +72 percent for the period.

Growth in North America has charged forward with major retailers, brands and apparel companies founding the Alliance for Bangladesh Worker Safety. Companies including Target, Gap, Walmart, Nordstrom, Macy's and Kohl's have pledged to achieve 100 percent inspections at all alliance factories by 2014.

Factories in China shift inland, score low in social compliance
As costs have continued to rise in developed manufacturing areas such as Guangdong, Jiangsu, Shandong and Zhejiang, manufacturing has been moving inland where labor costs can be up to 70 percent cheaper.

AsiaInspection analyzed data from the Social Audits performed at factories in China, with all audits adhering to the internationally recognized SA 8000 or Sedex (SMETA) Standards for Social and Ethical Compliance. For the study, compliance scores were measured as a number between zero and ten, with ten representing full compliance.

The average compliance score within China in 2013 was 6.22/10. Factories in Western China, where buyers have been chasing lower costs, scored the lowest with a compliance score of 5.91/10. China's largest manufacturing hub, the Guangdong province, had the highest average compliance score of 7.1/10, followed by the North at 6.12/10 and the well-known eastern seaboard exporting provinces 6.08/10.

"Buyers should be aware that shifting production to cheaper regions is likely at the cost of social compliance," said Sebastien Breteau, CEO of AsiaInspection. "Recent events through Asia have shown that the social and safety risk is very real for the whole supply chain. Chasing lower production costs must come with a holistic approach of on-site monitoring and auditing."
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