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Grenfell Tower offers grim reminder of third-party risk

Neil Hodge | June 20, 2017

Shortly before 1 a.m. on Wednesday, 14 June a fire started somewhere on a 24-storey residential tower block in central London. No one knows exactly how the fire started, or on which floor. But what there is no doubt about is the speed at which the fire spread: Within an hour the blaze had moved from one of the lower storeys to the 24th floor on at least one side of the building. So far, 79 people have either been declared dead, or presumed so.

The incident is the subject of a criminal investigation with possible prosecutions for health and safety violations, as well as corporate manslaughter charges. The government has also ordered a public inquiry into what went wrong.

Already a litany of errors is emerging that is frankly unbelievable. The tower block did not have enough fire extinguishers, and many of those that were present were out of their test date. Nor was there a sprinkler system: Only tower blocks built after 2007 have this requirement, and fewer than 1 percent of council tower blocks in the United Kingdom are fitted with them.

There was only one emergency escape route for over 500 residents, and no building-wide fire alarm system. The building’s dry risers—vertical pipes used by firefighters to distribute water to multiple levels of a building—were not working. A fire-safety card located in the ground floor advised residents to “stay put” in the event of a fire, rather than evacuate—a strategy that only works in a certain type of building structure, but which may have contributed to the death count in this instance. A planned fire review never took place. Undoubtedly, details cataloguing further errors are bound to emerge.

The tragedy exposes all too readily the worst aspects of lax compliance, failed regulation, and a culture of minimum standards, minimum spend, and minimum oversight. A government that has consistently cut red tape (ostensibly for the benefit of small businesses) has deregulated the building and construction sectors to such an extent that it has potentially increased the risk of such incidents happening again.

Meanwhile, rules were seemingly ignored in favour of cutting costs. Cladding that should not have been used in buildings exceeding 18 metres was used in a high-rise measuring almost four times that height. Less combustible material would have also cost £2 (U.S. $2.5) extra per square metre, raising the total cost by a mere £5,000 (U.S. $6,300), according to some estimates. Grenfell Tower is located in the Royal Borough of Kensington and Chelsea, one of the wealthiest in the country, and containing some of the most expensive houses in the world. However, the high-rise’s residents were more blue-collar than blue-blood, a consideration that may have swayed the council’s judgement, and a fact not lost on those who’ve lost both their homes and family members.

There may be many villains in this story, but given the speed at which the fire engulfed the building—as well as live-action footage of how it appeared to spread—the finger of blame is pointing more immediately at the type of external cladding used, and how it was installed.

Given the risks associated with how a company’s goods or services may be used (or abused), perhaps compliance professionals should consider how their organisations can gain greater assurance that their products are being used responsibly, and that they are not liable—or even tainted—by any incidence of misuse.

There is no suggestion that the company that manufactured the cladding has done anything illegal, or that it has circumvented safety requirements in production or sale. Instead, it appears that its products were wrongly used and were inappropriate for a building of this height.

The fault therefore lies not with the manufacturer, but with whichever individuals or organisations made the decision to use its products improperly, such as the housing association, the local authority, and the contractor, as well as the government department that set the safety rules at such a low bar. In the meantime, however, the cladding producer will see its name run alongside headlines detailing a national disaster and a rising death count and may well see a dip in sales as a result.

It is not the first time that a company has fallen foul of its products being used dangerously and/or inappropriately through its supply chain. Some years ago, General Electric (GE) found that its ultrasound machines—meant to help doctors carry out pregnancy scans in remote villages in India—were being misused to facilitate female sex-selective abortions. These were illegal under India’s Pre-Natal Diagnostic Techniques (PNDT) Act of 1994, which also prohibits the use of equipment or techniques for the purpose of detecting the sex of an unborn child.

The scandal forced the company to put in place stringent controls to review its sales processes, as well as conduct regular audits to check that end users had valid PNDT registration certificates.

Given the risks associated with how a company’s goods or services may be used (or abused), perhaps compliance professionals should consider how their organisations can gain greater assurance that their products are being used responsibly, and that they are not liable—or even tainted—by any incidence of misuse.

There is precedence for companies to check their supply chains for abusive practices and behaviour. The U.K.’s Modern Slavery Act, for example, says that companies must disclose in their annual reports what steps they have taken (or not taken) to prevent human trafficking or slavery in their own businesses and their supply chains.

There is no reason why similar legislation—or voluntary best practice—could not be introduced that details what measures companies are taking to ensure that their products are being sold and used responsibly. As always, such an undertaking will require additional cost—but the price may well be worth it.