The hidden and underexamined human cost behind steel supply chains

Plenty of us want to know where our coffee comes from or whether the chocolate we're buying has been ethically sourced, but far fewer of us pay attention to how the steel in our fridges or cars got there, let alone make a buying decision based on that knowledge.

That should change, according to Professor David Upton, who holds the American Standard companies chair in operations at Saïd Business School.

"People would not avoid buying a car because there was steel in it but nevertheless there is a supply chain for [steel] and there is a very nasty supply chain for some of it," he said.

"In Bangladesh, for example, workers are killed every three or four weeks and injured every day working on shipbreaking for steel."

Between them, India, Bangladesh and Pakistan, all of which use "beach breaking", account for around 70% of all shipbreaking, according to Patrizia Heidegger, the executive director of Shipbreaking Platform, an NGO. It's big business because the steel in the ship is valuable even when the ship itself has reached the end of its working life.

She explained how it works: "For example, a British company could sell two crude oil tankers to Pakistani breaking beaches for around $8m each. In between the yard owners in South Asia and the European company usually comes a so-called cash buyer who proposes a price to the ship owner and finds the best offer for the end-of-life vessel in a breaking facility. If the cash buyer is good at speculating on local steel prices, he also has a large profit margin."

Labourers on beach breaking sites are often better paid compared to other jobs for unskilled workers but this is not enough to justify the conditions in which they work, she said.

"They [ship owners, cash buyers and yard owners] earn a lot of money through a system which is based on weak enforcement of labour rights and environmental protection, dangerous working conditions for the unskilled and unprotected workers and the piling up of millions of tons of hazardous wastes in India, Bangladesh and Pakistan."

In the last two weeks, six workers have died at Gadani in Pakistan, where the industry employs around 15,000 people.

The breaking itself is done in an extremely low-tech fashion: the ship is driven onto the beach at full speed until it jams to a stop in the mud. Workers dismantle it piece by piece, allowing huge steel plates to fall to the ground – which is how many of the injuries and deaths occur, Heidegger said.

"The second problem is pollutants, including hazardous waste," she said. "The steel is valuable but ships are also full of things like asbestos, heavy metals, polychlorinatd biphenyls (PCBs) and maybe even radioactive material from fire detectors … these things are not disposed of properly."

It is usually dumped or simply washed away by the tide, causing significant environmental concerns. Workers have little protection from asbestos or other hazards; trade unions, such as the International Metalworkers' Federation, believe that people working in the ship industry tend to die at a much younger age than others in India.

One of the problems is steel is a commodity sold in international markets, making it very difficult to trace where it came from by the time it turns up in a consumer product. Improved supply chain transparency would help but would be difficult to manage in any practical way, said Heidegger, who suggested flipping the problem on its head: make the ship's owners responsible for ensuring that their products are recycled properly once they are finished with them.

Consumers could help by asking manufacturers and retailers to look at their own supply chains and examine whether their products are shipped by cargo companies that recycle their old ships responsibly, she said.

"The Clean Shipping Index is a tool that lets cargo owners check this ... as well as other environmental concerns."

The EU recently voted on regulations that require EU-registered ships to use "green" recycling facilities, but the new rules miss a crucial point, said Heidegger: there is nothing to stop European owners re-registering their ships outside the EU before sending them for breaking. At the moment only around a tenth of vessels are flying European flags when they reach the end of their lives, even though around 40% of the world's fleet is owned by European companies, she said.

But don't focus too narrowly on shipbreaking and steel, or you will miss the point. There are all sorts of unexamined products in western supply chains, from the agates in jewellery (polishing them can cause silicosis, a lung disease) to items with components made in certain Chinese and Indian factories (some factories remove safety guards that protect workers' fingers to speed up production). And, in many cases, it is nearly impossible to bring in supply chain transparency in a way that will make a difference.

"There's almost nothing we can do," Upton said. "At this stage I don't think it's realistic to think that consumers will be able to generate enough pressure on these invisible supply chains to have the same effect as in things like coffee, tea and soy beans. It is a much more difficult problem to solve than with obvious consumer items. And some people argue that if you try to impose Western standards on other countries it's a restraint of free trade."

Equally, many workers depend on mining, shipbreaking and other dangerous industries for their livelihoods, meaning that simply shutting these industries down will also cause difficulties – although this is in no way justifies poor safety standards, Upton added.

One solution might be along the lines of that found by Codelco, a Chilean mining company. It now uses remote-controlled equipment to extract copper from some of its mines. This is safer and better for business – a powerful argument, where it can be made to work.

"Looking for a solution that is good for the business owners and for the workers that are dependent on these industries will be more sustainable in the long run," said Upton.

But this logic will not hold up everywhere; sometimes life is cheaper than the up-front costs of choosing a safer option. "In some industries, in some parts of the world, it is less expensive to employ cheap labour – perhaps dangerously – than to make the investment required to ensure that people work safely," said Upton.

"We just haven't found good solutions to this problem. That's not to say that they can't be found, but we haven't found them yet."

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