Bangladesh’s Latest Tragedy

Date: September 13, 2013

Bangladesh’s Latest Tragedy

The date April 24, 2013 is not one that will be seared into the minds of the average person, but for the garment industry and the thousands of people affected by the events of that tragic day in Bangladesh, it’s one that will be hard to forget.

The Rana Plaza factory-building collapse that claimed at least 1,129 lives and injured more than 2,500 workers will undoubtedly stand out in history as one of those watershed moments, what scientists call a major paradigm shift where old ways of looking at things are no longer valid. The disaster's causes were many, and there is still plenty of blame to go around. But what is most painful is that it was all so avoidable. Yet critics say they have seen it all before and doubt if the industry will really change, even though major retailers responded swiftly with a series of major commitments and foreign governments continue to exert pressure.

A day that will live in infamy

The factory building that collapsed April 24 in Savor, an industrial suburb outside Dhaka, Bangladesh’s capital, was the deadliest disaster in the history of the garment industry. The building was constructed with substandard materials in blatant disregard for building codes, according to a high-level Bangladeshi government report issued May 22.

The 400-page report on the collapse of the Rana Plaza building found widespread fault for the disaster. It blamed the mayor for granting construction approvals and recommended charges against the building’s owner as well as the owners of the five garment factories housed in the building, which could result in life sentences if they are convicted. The factory owners had urged workers to return to their jobs despite evidence that the building was unsafe. 

The Rana Plaza building collapse has focused global attention on unsafe conditions in the garment industry in Bangladesh, the world’s second-leading exporter of clothing, trailing only China. According to the Bangladesh Garment Manufacturers and Exporters Association, the country has more than 5,000 garment factories, handling orders for nearly all of the world’s top brands and retailers. Its economy rapidly grew into an export powerhouse largely by delivering lower costs, in part by having the lowest wages in the world for garment workers – $38 a month.

The Bangladesh Department of Commerce and Industry reports that the country ships around $15.6 billion of ready-made garments every year, equivalent to 80% of its total exports. 60% of Bangladesh’s garment exports go to Europe, 23% to the US, and 5% to Canada. The textile industry accounts for 17% of the country’s gross domestic product and employs roughly 4 million people. With a population of 160 million, 31% lives below the poverty line.

The government report said that Rana Plaza was a disaster waiting to happen. The owner had illegally constructed upper floors to house garment factories employing thousands of workers. Large power generators placed on the upper floors, needed because of regular power failures, would shake the poorly constructed building whenever they were switched on.

On April 23, cracks appeared in the building, shaking the structure enough that many workers fled. An engineer who had been called to inspect the structure warned that it was unsafe, but the owner and factory bosses dismissed concerns and ordered workers back into the building the next morning. A generator was switched on, causing the building to buckle and collapse. The government’s report recommended that the owner and factory owners be charged with culpable homicide and for bribing government officials for construction approvals.

Garment industry responds but remains divided

Within weeks of the building collapse, several of the world’s largest apparel companies – including the retailing giant H&M and Inditex, owner of the Zara chain –agreed to a far-reaching and legally binding plan, called the Bangladesh Fire and Building Safety Agreement. It requires retailers to help finance fire safety and building improvements in the factories they use in Bangladesh.

Consumer and labor groups hailed the move by H&M, the largest purchaser of garments from Bangladesh, as an important step toward improving factory safety in that country, saying it would add pressure on other Western retailers and apparel brands to do likewise. C&A of the Netherlands and two British retailers, Primark and Tesco, quickly joined in.

The new agreement calls for independent, rigorous factory safety inspections, with public reports and mandatory repairs and renovations underwritten by Western retailers. A legally enforceable contract, it also calls for retailers to stop doing business with any factory that refuses to make necessary safety improvements, and for workers and their unions to have a substantial voice in factory safety.

In announcing its move, H&M said that “in order to make an impact and be sustainable,” the agreement “would need a broad coalition of brands.” A company statement said the agreement committed participants to the goal of a safe and sustainable garment industry in Bangladesh “in which no worker needs to fear fires, building collapses or other accidents that could be prevented with reasonable health and safety measures.”

Worker rights groups have praised the accord. Other big names that have since signed on include PVH, Tchibo, Marks & Spenser, El Corte Ingles, jbc, Mango, Carrefour, KiK, Helly Hansen, G-Star, Aldi, New Look, Mothercare, Loblaws, Sainsbury’s, Benetton, N Brown Group, Stockman, WE Europe, Esprit, Rewe, Next, Lidl, Hess Natur, Switcher, Sean John, and Abercrombie & Fitch. But numerous investor, religious, consumer and labor groups are pressing even more companies to sign on.

Noticeably absent from the accord are Wal-Mart Stores, the American chain that is the world’s largest retailer, and other big name US firms. Wal-Mart had announced that it would not sign the accord, but instead would make public its safety inspections at all of its suppliers’ authorized factories in Bangladesh. It committed to complete reviews of its 279 supplier plants within six months. The factory names and inspection information would be posted on the company’s website. 

The company said it would also evaluate factories’ electrical and fire-safety systems, review their compliance with local building standards and permits, and visually inspect buildings for signs of structural distress. Production would cease immediately at factories where urgent safety issues were identified, Wal-Mart said.

However, at the end of May, Wal-Mart and other US retailers, likely feeling pressure from consumer and labor groups for not doing enough to ensure factory safety, decided to forge their own industry plan. The new effort is being spearheaded by the Bipartisan Policy Center, a nonprofit group based in Washington DC. According to the Center, leading retailers such as Gap, JC Penny, Sears, Target, Wal-Mart and others, together with the National Retail Federation and the American Apparel and Footwear Association, would work to “develop and implement a new program to improve fire and safety regulations in the garment factories of Bangladesh.”

Two well-regarded veteran US politicians, both members of the Bipartisan Policy Center – former Senators George J. Mitchell, a democrat, and Olympia J. Snowe, a republican – are leading the effort. The new group, which was joined by the Retail Industry Leaders Association and the Retail Council of Canada, issued its formal plan in early July, which comes with a $42 million fund to improve safety conditions in Bangladesh’s factories over the next five years.

The new US-led plan requires all factories working with the 17 retailers in the pact to be inspected within a year and for the results to be made public. The group says it will implement safety standards by October and refuse to buy from factories they determine to be unsafe. Each retailer’s financial contribution will correspond to the size of its operations in the country, with those with the most production paying $1 million over five years. It also offers funds for displaced workers and low interest loans for quick repairs. An NGO will implement the plan, while a board will release semi-annual progress reports.

According to media reports, US retailers opted out of the European-dominated plan out of concern over legal liabilities. Critics, however, say that the American retailers were uncomfortable with the binding obligations and the potential costs of the plan. They also say the US plan will divide the industry.

Losing patience

Regardless of whose plan is adopted by which company, pressure has been mounting for major governments to take action. In the US, labor advocates stepped up pressure on the Obama administration to convey its disapproval of working conditions in Bangladesh by revoking its special trade status. Bangladesh is one of 125 countries that receive breaks on US tariffs under a WTO program, called the Generalized System of Preferences, intended to promote economic growth around the world, but excludes the garment industry.

In December 2012, US officials gave the Bangladeshi government a list of areas requiring improvement in order for the country to keep its status, but there was little progress, US officials said. The list called for an end to government harassment of labor organizers and greater rights for workers. Citing lack of progress in these areas, the US Trade Representative in late June revoked Bangladesh’s GSP privileges. 

International organizations have also taken a tougher line on the country’s labor and safety practices. In May, the International Labor Organization and the World Bank refused to let Bangladesh join a textile industry-monitoring program until its labor laws and conditions for unions improve. The country had asked to join the Better Work Program, which involves unannounced, independent inspections of participating textile plants by outside experts, together with technical help from the World Bank for managers and plant owners.

But ILO and World Bank officials regard the country’s labor laws as so weak and the conditions for workers and unions so treacherous that they demanded major changes in advance of approving its participation. An overhaul of the country’s labor laws was sent to Bangladesh’s parliament in June where it is now being deliberated, evidence that outside pressure may be starting to have an effect.

The perilous game of subcontracting

Set aside for a moment the popular image of a typical garment factory in Bangladesh: grimy, sweaty, unsafe, women and children sitting in dimly lit sweltering rooms sewing shirts and T-shirts for hours on end.

Now imagine a factory where workers sit in long, orderly rows, under bright neon lights, with fans blasting away. The children are not on the factory floor but in an in-house day care. The starting wage is $51 a month, and the workers get hour-long lunch breaks and free medicine from a full-time doctor employed by the factory. It meets safety standards and passes inspections. This is not fantasy, but the scene at many typical medium-sized factories in Bangladesh, according to local industry representatives. Ones like this are common, they say, but normally don’t make the headlines.

The ones that do, unfortunately, have mushroomed in and around Dhaka where they rent space in facilities where they have no business being: shopping malls or office buildings that aren’t equipped to handle the heavy machinery the trade requires. Until now, the government had mainly turned a blind eye. After all, the factories were boosting employment.

Since 2005, almost 2,000 garment workers have been killed in factory fires and structure collapses, according to a CNN report. And all of them have been at small, unregulated factories. These are the factories that don’t deal directly with Western clothiers. Typically, when a company in the US or Europe places an order, it does so with a large or medium-sized factory that most likely lives up to the company’s standards for a decent wage and working conditions.

But with business booming and with the need to keep costs down, factories are forced to farm out part of their work, often to smaller, fly-by-night operators. Such passing-of-the-buck is now an industry norm and was no doubt partly responsible for the Rana Plaza tragedy. Many retail brands are even unaware that their work is being subcontracted out to substandard factories. The president of the Exporters Association of Bangladesh recently lamented that, “Bangladesh already has world-class factories. Some buyers just avoid placing orders there to maximize their profits.”

The Rana Plaza collapse has served as a deadly reminder to retailers that taking responsibility for managing the entire supply chain is critical, especially oversight over subcontractors. In practice, few subcontractors are audited. Experts suggest that mainstream retailers learn from luxury goods groups how to control their suppliers. In the luxury garments segment, retailers tend to have a tighter grip on the supply chain, with more control over subcontractors who get audited regularly.

Can the garment industry’s image be saved?

Global clothing brands responded in starkly different ways to the Rana Plaza building collapse. Some quickly acknowledged their links to the tragedy and promised compensation. Others denied they authorized work at factories in the building even when their labels were found in the rubble.

The first approach deserves praise for honesty and compassion. The second tries to minimize damage to a brand by maximizing distance from the disaster. Communications professionals say both are typical public relations strategies, but neither may be enough to protect companies from the stain of doing business in Bangladesh.

With three deadly disasters in Bangladesh’s $20 billion garment industry in the past eight months, possibly the only way retailers and clothing brands can protect their reputations is to take a total corporate social responsibility approach and visibly and genuinely work to overhaul safety in Bangladesh's garment factories, say industry specialists. Such an approach could have prevented the factory fire that killed 112 workers in November 2012 and a January blaze that killed seven.

With the latest disaster, Bangladesh’s worker safety record may have become so notorious that the reputational risks of doing business there may now be too great, even for retailers and brands that didn’t work with factories in the collapsed Rana Plaza building or the Tazreen Fashions factory that burned late last year. It may no longer be enough to say: We were not involved in those particular factories.

Companies that are downplaying involvement in Bangladesh's factory safety problems may be counting on the short memories of Western consumers, who tend to focus on price and may not even check where a piece of clothing has been made. But that may be a risky strategy, as reputation is built over a long period of time and can be ruined in a flash. Even companies that do make efforts to ensure they use only factories with good safety records are now at risk of being lumped in with the problems that are rife in Bangladesh’s garment industry.

What’s important, experts say, is that companies not only do something to overhaul the industry, but also be seen to be doing so by the public. Whether the two industry plans in the works will fix the garment industry’s image problem is open to debate, but some retailers are already getting more serious about sanctioning factories and subcontractors that break the rules.

In mid-May, Wal-Mart placed Bangladeshi company Simco’s four factories on its banned suppliers list even though the company had never failed a safety audit in 22 years. Wal-Mart said that Simco was banned for unauthorized subcontracting of an order to Tazreen Fashions where 112 workers died in the November fire. Simco said it had subcontracted to Tuba Garments, which was an authorized Wal-Mart supplier at the time, but Tuba then shifted the order from its mother factory to Tazreen. This was done, apparently, without Simco’s knowledge, and drives home again the importance of knowing all the players in the supply chain. 

Such decisions only highlight the larger dilemma that the industry will have to wrestle with going forward – is it better to sever ties with long-time suppliers that may pose a safety risk, or stay with them and try to lift standards? While cutting costs will always be a driving force in the garment industry, one’s company image and reputation for corporate social responsibility may both require greater focus in the years ahead. 

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