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.