Bangladesh
factory deaths prompt some retailers to leave, but staying poses challenges too
JONATHAN FAHEY and ANNE D'INNOCENZIO, Business Writers with Associated Press
Bangladesh
offers the global garment industry something unique: Millions of workers who
quickly churn out huge amounts of well-made underwear, jeans and T-shirts for
the lowest wages in the world.
But
since the building collapse on April 24 killed at least 1,100 garment workers
in Bangladesh,
becoming one of the deadliest industrial tragedies in history, the industry has
gone from one of the country’s greatest assets to one of its biggest
liabilities.
”The
risk factors have jumped off the charts,” said Julie Hughes, president of the
US Association of Importers of Textiles and Apparel, a trade group that
represents retailers who import garments. ”This is worse than what anyone had
imagined.”
Working
conditions in Bangladesh’s
garment industry have been known to be grim, a result of government corruption,
desperation for jobs, and industry indifference. But the scale of this tragedy
has raised alarm among executives and customers.
The
Facebook pages of Joe Fresh, Mango and Benetton, a few of the brands whose
clothing or production documents were found in the rubble of the collapsed
building, are peppered with angry comments from shoppers. Some warn they’re
going to shop elsewhere now.
Retailers
are also facing street protests. In the US,
university chapters of United Students Against Sweatshops are helping to stage
demonstrations against Gap in more than a dozen cities including Seattle, Los Angeles and New York. The group
plans to target other retailers it believes are not committed to stricter standards
for Bangladeshi factories.
The
rising death toll may force Western brands to make a choice: Stay and work to
improve conditions. Or leave and face higher costs, similar or worse worker
conditions in other low-wage countries and criticism for abandoning a poor
nation where per-capita income is just $1,940 per year.
Most
retailers have vowed to stay and promised to work for change. Wal-Mart and the
Swedish retailer H&M, the top two producers of clothing in Bangladesh,
have said they have no plans to leave. Other big chains such as The Children’s
Place, Mango, J.C. Penney, Gap, Benetton and Sears have said the same.
”Today’s
economy is global, and it is not a question of if a company like H&M should
be present in developing countries,” said Anna Eriksson, an H&M
spokeswoman. ”It is a question of how we do it.”
But for
some, the risk of being in Bangladesh
has become too great. The Walt Disney Co. announced this month that it is
stopping production of its branded goods in Bangladesh.
Industry
experts predict others will quietly reduce their dependence on the country.
”Almost
everybody is going to cut back on what they are sourcing from Bangladesh,”
Hughes said. ”Not today, but by a year from now our imports are going to fall.
The question is how much.”
But it’s
not easy for retailers who make their clothes in Bangladesh to simply leave.
There is
no shortage of cheap labor or available garment factories around the world. But
it takes months or even years to establish relationships with new factories
that retailers can trust to turn out large volumes of garments to their
specifications on time.
Even if
retailers move their business to other low-cost countries, they still face
threats to their reputations.
Of the
major garment-manufacturing countries, Bangladesh’s
working conditions pose the highest risk to brands, according to Maplecroft, a
risk analysis firm based in Bath,
England. But Bangladesh
ranks somewhat better than many low-cost countries on other labour issues, such
as child labour and forced labour.
According
to Maplecroft’s Labour Rights and Protection Index, which measures the overall
risk of association with violations of labour rights, Bangladesh is the
17th-riskiest country in the world – and less risky than such garment-producing
leaders as China, Pakistan, Indonesia and India.
Another
reason it’s hard for retailers to leave is that Bangladesh is one of the few places
in the world that has enough workers, manufacturing capacity and experience to
provide what retailers demand: High volume, low prices, good quality and
predictable service.
The
garment industry in Bangladesh
is the third-biggest exporter of clothes in the world, after China and Italy. There are 5,000 factories in
the country and 3.6 million garment workers. Manufacturers have easy access to
cheap raw materials, and the country’s political situation has been relatively
stable.
And its
garment workers command the lowest wages – by far – in the world. The average
worker in Bangladesh earns
the equivalent of 24 cents an hour, compared with 45 cents in Cambodia, 52 cents in Pakistan,
53 cents in Vietnam and
$1.26 in China,
according to the Worker Rights Consortium, a worker advocacy group.
On
Sunday a Bangladesh
cabinet minister said the government plans to raise the minimum wage for
garment workers, and a new minimum wage board will issue recommendations within
three months.
Between
15 and 25 per cent of the wholesale cost of a garment is for labor. Unlike raw
material costs, which can vary, labor is the only major cost that retailers can
control.
“It’s a
country built for commodity products,” said Janet Fox, who arranged garment manufacturing
overseas for J.C. Penney and Under Armour and now works as a consultant. “It’s
not a highly skilled labor force, but they can make the basics.”
Bangladesh has long been a major garment
producer, but in recent years its production has soared.
For
decades, the global garment trade was controlled with a quota system called the
Multi Fibre Arrangement that limited production from developing countries to
protect higher-wage workers in developed countries.
When the
system ended in 2005, retailers flocked to Bangladesh because of its low
wages. Manufacturers scrambled to increase the size of their factories.
Land is
scarce in Bangladesh,
one of the world’s most densely populated countries. It packs 163 million
people, about half the population of the US,
into an area about the size of the state of Iowa. So the Bangladesh government, desperate to
boost employment, looked the other way as companies converted unsuitable
buildings into factories or crammed far too many workers and equipment into
small spaces, creating fire hazards, labour activists say.
Since
2005, at least 1,800 workers have been killed in the Bangladeshi garment
industry in factory fires and building collapses, according to research by the
advocacy group International Labor Rights Forum.
In November,
112 workers were killed in a garment factory in Dhaka,
the Bangladeshi capital. The factory lacked emergency exits, and its owner said
only three floors of the eight-story building were legally built. Clothes
destined for Disney, Wal-Mart and Sears were found among the building’s
remains, though Disney has denied its suppliers used the factory.
But as
horrific as that fire was, it wasn’t as bad as the April 24 collapse, the
garment industry’s worst disaster. The eight-story Rana Plaza building housing
five garment factories collapsed 15 miles north of Dhaka at the beginning of a
workday.
The
building wasn’t designed to hold factories, and three stories had been added
illegally. Most of the victims were crushed by massive blocks of concrete and
mortar falling on them.
Then as
the death toll was climbing, a fire broke out at a sweater manufacturer on
Wednesday in Dhaka, killing eight people
including a senior police officer, a Bangladeshi politician and a top clothing
industrial official.
Only a
few companies, including Britain’s
Primark and Canada’s Loblaw
Inc., which owns the Joe Fresh clothing line, have acknowledged that suppliers
were making clothes for them at the Rana
Plaza site and have
promised to compensate workers and their families. Loblaw’s CEO said suppliers
were making clothes for as many as 30 brands and retailers at the site.
Benetton
labels were found at the site, and the Italian fashion brand acknowledged that
one of its suppliers had used one of the factories. The company said that before
the collapse, the factory had been removed from its list of approved factories.
Mango,
whose production documents were found in the ruins, has said it was planning to
produce there but hadn’t started.
Clothing
retailers often depend on a web of contractors and sub-contractors to produce
goods for them. Fabric will be made at one factory, buttons at another, and the
item will be sewn together somewhere else. Large orders are often placed with
one contractor, who then farms out the work to several smaller factories.
Retailers
said they have strict standards that they require their suppliers to follow,
but they know little or nothing about conditions at individual factories that
make their clothes because there are so many of them.
But
retailers are very familiar with the general conditions in the countries where
they do business, and their importance to local economies means they can push
for improvements. Labour groups and other activists have said last month’s
tragedy is just the most extreme evidence that brands haven’t done nearly
enough to protect workers.
The
retail industry hasn’t released estimates on how much it would cost to upgrade
Bangladeshi factories to Western standards. But the Worker Rights Consortium
puts the cost at $1.5 billion to $3 billion. If the money was spent over five
years, it would be 1.5 to 3 per cent of the $95 billion expected to be spent on
clothes manufacturing over that time. Put another way, it’s 10 cents added onto
the cost of a T-shirt.
There
are limits to what companies can do to improve conditions, though, said Matthew
Amengual, a professor at the MIT Sloan School of Management who studies labour
regulation and enforcement in developing countries. “Companies have a very
important role to play, but they can’t do it just by auditing their supply
chain,” he said.
The
collapse of the factory in Bangladesh
showed how safety issues in the country are in some ways too ingrained and
complex for companies to monitor and change. It is much easier for a company to
push for more fire extinguishers or make sure fire exits aren’t locked than to
judge the structural integrity of thousands of factories.
Experts
said if big retailers and the Bangladesh
government don’t work together to improve standards and enforce them, more
production will gradually move out of the country.
“There
are huge risks to stay if there isn’t any progress,” said the Rev. David
Schilling, of the Interfaith
Center on Corporate
Responsibility, a coalition of shareholders that pushes companies to be more
socially responsible.
Disney,
which has said that less than 1 per cent of the factories used by its
contractors operate in Bangladesh,
said it has told all its suppliers to stop production in the country by the end
of March 2014. The company also said it would reconsider its decision if
conditions improve.
Others
have taken a different approach.
In the
wake of the November fire, Wal-Mart, the world’s largest retailer, toughened
its policies with suppliers. In January, it said that it would cut ties with
any factory that failed an inspection, instead of first issuing a warning.
Last
month, Wal-Mart said it will be tying some of the compensation of some
executives, including CEO Mike Duke, to the success of its compliance program.
Forty
garment buyers, including Wal-Mart, H&M, and J.C. Penney, met with labour
rights groups on April 29 in Germany
to discuss how the industry could improve safety conditions in Bangladesh.
The
labour groups are setting Wednesday as the deadline for brands to sign up to a
legally binding plan that would require retailers to pay for needed safety
improvements and allow independent inspections of the clothing factories in
Bangladesh.
Only two
companies — PVH, the parent company of such brands as Calvin Klein, Tommy
Hilfiger, and Tchibo, a German retailer — have signed up to the plan. Gap was
close to signing last fall but then backed out and announced its own plan that
included hiring an independent fire safety expert to inspect factories.
Adding
to the pressure on retailers, Avaaz, a human rights group with 21 million
members worldwide, has garnered more than 900,000 signatures on a petition
pushing Gap and H&M to commit to the proposal.
“We
would rather see companies stay in Bangladesh to compel and fund the
renovations that are necessary to turn these deathtraps into safe buildings,”
said Scott Nova, executive director at the Worker Rights Consortium.
Jonathan Fahey and Anne d'Innocenzio are Business Writers with Associated Press, Farid Hossain in Dhaka, Bangladesh,
contributed to this story
