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  Formation Carpets: Championing ethical business  


KATHMANDU, June 18: I am an entrepreneur, rather than a businessperson, clarifies Sulochana Shrestha Shah, managing director of Formation Carpets (FC). She prides in caring about the long term sustainability and evolution of her business and community, rather than only the bottom line.

Formation Carpets was established in 1991 by Shah and Linda Gaenslze with the aim of creating exclusive designs, ensuring outstanding quality and assuring a sound working environment for its employees. It has emerged as the leader in ethical business in Nepal in the past two decades.

In 1997, Shah received Human Rights Award from Minnesota Advocates, USA for her significant contribution in reducing child labor. Formation Carpets was chosen as the Best Practices from Nepal in the South Asia Pacific region in 2006. She is also popular in Nepal´s carpet industry as the mother of Rugmark (now Good Weave) - an initiative against child labor.

“All of our corporate social responsibility (CSR) activities are undertaken through close observation of the working conditions and production process,” Shah shared.

Since the second year of its operation, FC began providing day care facilities and scholarships for the children of its weavers. We started day care facilities so that during work hours weavers could concentrate on their work, rather than worrying about their children, Shah added.

The company provided health care facilities to its weavers and employees in the initial years and later adopted health insurance for the workers.

Around 90 percent of our factory workers are weavers and they receive health insurance for themselves and two kids, Shah said, adding, that they spend about Rs 1 million -- though their sister concern Hoste Haise -- a year for the well-being of 200 children of factory workers.

All FC employees get to know about company policies and other activities through a quarterly interaction between weavers and managerial staffers. FC also organizes literacy and awareness programs on labor rights and health education. Formation Carpets has well-ventilated and well-lit environmentally sound workplace.

All these efforts were simply a part of FC´s way of working, way before other businesses had even understood CSR properly.

Nonetheless, things have not been always pretty for Formation Carpets. The company has been suffering from labor problems since 2008. These issues were not genuine labor concerns because the company has been on top of its game, Shah noted. “We faced strike because we refused to submit to extortion from politicized trade unions,” she added.

In the last two years, the company has seen six strikes. Most of the skilful workers left because they were forced to be a part of Maoist-affiliated All Nepal Trade Union Federation Revolutionary (ANTUF-R) and were threatened of action if they did not join their political demonstrations.

In 2008, the company recruited 300 workers, which has now been reduced to 165. It had to shut its factory in Bhaktapur due to labor problems.

Shah has been tirelessly raising the sad fact in both national and international forums that the principles on anti-corruption cannot be upheld by businesses in countries like Nepal where they have to choose between extortion and closing down their business.

Had these problems not emerged, FC would by now have attained the heights that it has envisioned. Though the company still gets a lot of demand from international buyers, it has been able to honor them due to labor troubles. It is because of this very reason that international buyers and even some Nepali manufacturers have shifted to India and China.

Total carpet manufactured in the country has today reduced by 73 percent to 800,000 sq.m a year from about 3 million sq.m recorded about a decade ago.

Businesses and corporate houses can learn valuable lessons on practicing ethical business from Formation Carpets to ensure a win-win situation for all involved. However, the government and political parties must tackle politicized trade union movements if it wants sustainable growth of the sector and attract more investment in it.

Published on 2010-06-18 23:30:45
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