CSR Failures in Bangladeshi Apparel Industry : An Agency Theory Perspective

The apparel industry's complex global supply chain makes it difficult to monitor the upstream firms' Corporate Social Responsibility (CSR) practices. However, CSR failure in any stage of the supply chain also damages the downstream fashion brands’ reputation and profitability. In recent years, customers' sensitivity towards environmental, social, and worker safety has strikingly increased, which holds fashion brands responsible for CSR failures, although they do not have complete control over overseas manufacturing firms. Several cases of apparel industry CSR failures in Bangladesh attracted global attention in the last decade. This study explores why CSR practices in the fashion industry's global supply chain are susceptible to implementation failures, particularly in the Bangladeshi apparel industry, and how they could be mitigated. Agency theory deals with the issues related to principal-agent conflicts arising from information asymmetry. So, agency theory helps understand the CSR implementation problem and possible solutions. The findings from the cases this study went through explain that CSR failures in the supply chain negatively affect the reputation of the fashion brands because consumers want to know more about the supply chain, where the products they are purchasing are coming from, who produces, and how; and they value the corporate social responsibly (CSR) practices in the manufacturing stage. Therefore, implementing a good and sustainable CSR policy is a major concern of retailers. Information asymmetry and goal conflicts among the contracting parties (Principal and agent) lead to adverse selection, moral hazard, and hold-up problems in maintaining a standard CSR practice. This study delves into these issues through the lens of agency theory and shows that agency theory instruments are suitable to explain the apparel industry's global supply chain relationships and compliance mechanisms and figure out the possible implications. Therefore, agency theory can help mitigate the CSR failures of Bangladesh's Ready-Made Garments (RMG) industry