(Bloomberg Businessweek) -- When the Rana Plaza garment factory in Bangladesh collapsed in April 2013, killing more than 1,100 workers and injuring 2,500 others, fashion brands worldwide pledged to clean up the horrific conditions in sweatshops churning out their garments.
Survivors said local managers had pressured employees to report to work even though deep cracks had appeared in the building's walls on the previous day, leading engineers to declare the eight-story structure unsafe. Once generators were switched on, the edifice crumbled.
With the whole world watching, about 200 global fashion brands, including Sweden's H&M Group, Zara parent Inditex of Spain and Irish fast-fashion retailer Primark, signed a sweeping accord designed to improve building safety. For the first time, they pledged to allow independent inspections and to pay for needed repairs. They also agreed to finance the accord with annual fees of as much as $500,000 apiece and to submit disputes to the Permanent Court of Arbitration in The Hague.
It seemed that the fashion industry—with its reputation and profits on the line—was about to go through a sea change in its treatment of low-wage workers consigned to the bottom of complex and sometimes hidden supply chains.
It didn't. Ten years later, much of the work that began with a burst of reformist zeal remains to be done, not just in Bangladesh but throughout South Asia and other garment-manufacturing centers in Latin America and Africa. The economics of the fashion industry remain stacked against the people who make most of the world's clothes.
Clothing brands rarely make their own garments and don't take responsibility for setting workers' wages. Instead, the brands contract with garment factories in low-cost countries such as Bangladesh. In turn, factories often rely on subcontractors, sometimes without the knowledge of the brands, to manage their workloads.
e extinguishers and sprinkler systems, new electrical wiring, safety-training programs and fortified foundations. But only about half of the 4,500 clothing factories there have experienced such upgrades, according to a Bloomberg tally of factories that are covered by workplace safety agreements.
Only four large US brands signed the Bangladesh accord. Instead, 26 US retailers signed a voluntary agreement led by Walmart Inc. that didn't mandate independent inspections or bind signatories to make repairs. That agreement and a successor program allowed Walmart to “address root causes of issues like unsafe working conditions,” a company spokesperson says via email. “Walmart's core values of respect for the individual and for human rights demand that the products we source are responsibly made.”
Supply chains remain opaque, posing reputational risks for fashion brands, according to a UCLA Anderson School of Management report. And neither of the post-Rana Plaza safety agreements address other workplace conditions, such as low wages and worker exploitation.
In Bangladesh, “we see sweeping progress in this one very important area of building safety,” says Scott Nova, executive director of the Worker Rights Consortium, an independent labor monitoring organization, “and yet we see very little progress in other labor-rights areas.” Most textile and garment workers don't receive a living wage, abuse remains rampant, and the right to organize is restricted, he says.
Bangladesh Commerce Minister Tipu Munshi, in an interview, says “Bangladesh turned a sad incident into an opportunity for change, setting itself on the path to compliance. But we need to do more,” he concedes, pointing out that there are factories beyond the scope of the accord's successor agreement, in place since 2018. “The government is fully aware of the problems.”
Outside Bangladesh, factory conditions have changed little, leaving workers in jeopardy. In the past two years the Clean Clothes Campaign, an alliance of labor unions and nongovernmental organizations, has gathered anecdotal records on dozens of serious injuries or deaths from incidents involving electrocutions, fires, floods and building collapses in countries from Pakistan to Peru.
Now the labor advocates behind the original Bangladesh accord, which resulted in numerous upgrades, are expanding their efforts to other countries through what's known as the International Accord. The plan is to keep adding country-specific safety protocols for major garment-producing centers, including India, Morocco and Sri Lanka. Designed to be as stringent as the original, the new accord is likely to improve workers' physical safety where it's adopted. Yet the fundamental dynamics that make conditions in the fashion supply chain so dangerous aren't likely to change.
Countries whose economies depend on clothing production don't want to crack down too harshly on factories that provide jobs and exports, says Mark Anner, a labor and employment relations professor at Penn State University. Despite low wages and long hours, a large and steady stream of workers (mostly women) is available to make clothing, allowing factory owners to keep wages below living standards, says Laura Boudreau, assistant professor of economics at Columbia Business School.
Brands don't hesitate to use their leverage to pit factories against each other. “In this fashion business, the brands are the key players,” says Amirul Haque Amin, president and co-founder of the National Garment Workers Federation, the largest national trade union in Bangladesh. “Much of the time they're spontaneously cutting their orders, they're changing their orders from one country to another country—sometimes they're migrating their orders from one factory to another.”
During the Covid-19 pandemic, many brands canceled orders and didn't pay factories for jobs that were already complete, leaving their owners unable to compensate employees. In a study of 78 large brands with production in Bangladesh during the pandemic, 86% were found to have canceled orders and 85% delayed payment for more than three months. An April 12 report by New York University's Stern Center for Business and Human Rights said global brands continue to engage in such practices, resulting in layoffs of hundreds of thousands of workers in Bangladesh and other countries.
“Ethical or fair prices are absent,” says Faruque Hassan, president of the Bangladesh Garment Manufacturers and Exporters Association. “Factory owners invested a lot of money in safety standards, but prices quoted by our customers are still low.”
Some two dozen US companies, including Gap, Target and VF, the owner of such brands as Vans and Timberland footwear, signed up for the voluntary program, known as the Alliance for Bangladesh Worker Safety, which had no legal authority and lacked an independent monitoring body. They all now belong to a follow-on program called Nirapon (“safe place” in Bangla), which calls on them to conduct voluntary factory audits. The results aren't made public, and repairs are the factory owner's responsibility. Gap, Target and VF declined to comment.
Consumers, who've become accustomed to purchasing fast fashion on the cheap, also play a role in the workers' lack of economic progress. Brands are under competitive pressure not to insist on costly factory reforms that might result in higher prices, says Nova of the Worker Rights Consortium. In the US, the consumer price index for apparel has been mostly flat since 1994, while prices for goods and services overall have more than doubled, according to data from the US Bureau of Labor Statistics.
The state of the garment industry today is the result of a clothing production boom that began in the 1990s, when innovations pioneered by Inditex reduced fashion's lead times and allowed customers to access new styles faster and more cheaply than ever. After the Multifiber Arrangement, which limited clothing imports by the US and Europe, ended in 1995, garment manufacturing in developing countries such as Bangladesh grew rapidly.
Factory capacity increased at a breakneck pace, resulting in buildings with structural defects, poor ventilation and hazardous electrical systems. Before the Rana Plaza collapse, there were tragic accidents at many other garment factories in Bangladesh. In 2012 more than 100 workers were killed in a fire at the Tazreen Fashions factory about 9 miles (14.5 kilometers) from Rana Plaza.
With demand for fashion proving insatiable, retailers have been able to keep costs low and capture comfortable margins. For a polo shirt sold for $67.03 at retail, 0.1% of the total goes to worker pay, while more than 50% goes to brand profit, according to a 2017 study published by the International Labour Organization.
The binding accord shifted a power dynamic that had historically favored brands. Abercrombie and Fitch, American Eagle Outfitters, Fruit of the Loom and PVH, owner of such brands as Tommy Hilfiger and Calvin Klein, were the only major US signatories. All but Abercrombie have also joined the new International Accord.
It's the No. 2 apparel maker after China, 2022 World Trade Organization data show. Apparel accounts for 80% of the country's exports, according to Bangladesh's Export Promotion Bureau.
ILO's count estimated living wage
In developing countries, “these types of manufacturing jobs in apparel tend to be some of the first job opportunities that become available—in particular, for women,” says Columbia's Boudreau. At the same time, she and other economists question whether such entry-level jobs are just career dead ends.
While labor advocates complain that Bangladesh's garment workers remain underpaid and badly treated, many agree building safety has improved. Square Fashions Ltd., in Dhaka, the capital, makes T-shirts, sweatpants and dresses for brands such as Puma, Tommy Hilfiger and Wrangler. In recent years, potentially life-threatening conditions such as structural cracks and water damage—212 safety hazards in all—have been repaired or are pending at the factory, according to International Accord records.
US brands that haven't signed the accord in some cases get the benefit of its rigorous safety inspections and remediation without having to pay its annual fees by sourcing products from factories in which accord members also operate, according to the Clean Clothes Campaign.
Yet fatal accidents still occur. In 2017 a boiler explosion killed at least 10 garment workers in a Dhaka factory that had been checked for structural concerns and fire safety. Boilers weren't included in the inspection but were added to the accord's factory checklist in 2021.
“Brands were willing to sign a binding agreement in one area, right in the wake of the Rana Plaza collapse in the face of all that public pressure,” says Worker Rights Consortium's Nova, who was involved in the negotiations. “We need binding, enforceable agreements between brands and retailers and worker representatives to address labor rights issues across the board,” he says—and not just in Bangladesh.
Labor experts view the Nirapon voluntary program as similar to the brand-led factory monitoring that was already in place in Bangladesh before 2013. “This ‘code of conduct' and self-monitoring system just doesn't deliver,” says Anner at Penn State. “The proof is in the specific case of Rana Plaza: Factory installations were inspected by voluntary programs, and they passed. And then the building collapsed.” Infrastructure in Bangladesh remains broadly vulnerable to safety hazards. This became apparent when a fire on April 4 raged through a shopping complex and burned down 5,000 stores, including retail clothing shops. “The law is weak, and the enforcement of the law is even weaker,” says Kalpona Akter, executive director of the Bangladesh Center for Workers Solidarity. “The government needs to do a lot more to make all factories safe for workers. And it's not just about the garment industry, it's also about other sectors.”
In December, the International Accord chose to begin its expansion effort in Pakistan, where factory conditions mirror Bangladesh's before the Rana Plaza disaster. In September 2012 an explosion at the Ali Enterprises garment factory in Karachi killed more than 250 workers.
More recently, in August 2021, when a sudden fire broke out at an unregistered luggage factory in Karachi, 16 workers died because the exits had been locked and the windows covered with iron bars. A larger-scale tragedy was averted, however, because the remaining 250 staffers had yet to arrive for the morning shift. “Safety issues have been raised as an important issue in Pakistan, but despite the passage of 10 years the situation has not changed,” says Zehra Khan, founder and general secretary of the Home-Based Women Workers Federation in Pakistan.
So far, major US retailers with production in Pakistan, including Gap, Levi Strauss and Urban Outfitters, haven't signed the Pakistan accord. Many of them point to independent codes of conduct they've established in factories; none has a legally binding component.
A Levi Strauss & Co. spokesperson said in an emailed statement that the company in 1991 became the first apparel brand to audit factories and that, since 2009, it has corrected every deficiency found in building, fire and electrical safety inspections in Bangladesh. “We agree with the intent and the spirit of the International Accord and applaud the progress it has made,” the statement says. “But it is not the only way to support workers in Bangladesh or anywhere else.” An Urban Outfitters spokesperson says the company “takes responsible sourcing seriously so workers in our supply chain can have a safe, healthy workplace. We are making continuous efforts to improve our supply chain transparency.”
Being part of a mandatory accord comes with a cost. Brands that have signed up in Pakistan will pay as much as $185,000 a year to fund the program. Large companies like PVH also cover the cost of hiring and training full-time engineers and other experts to help with implementation, says Michael Bride, PVH's senior vice president for corporate responsibility.
“Signing on is the smart thing to do, because they don't have anything to protect them,” Nova says. “If there is another fire like Ali Enterprises tomorrow—which could easily happen in one of these factories—and it turns out to be a producer for a well-known US brand that cares about its brand image, it's devastating.”
Investors are starting to intervene. The Interfaith Center on Corporate Responsibility, a coalition of investors and asset managers with $4 trillion under management, is encouraging members with large holdings in US apparel retailers to push companies to sign the Pakistan accord, says David Schilling, a senior adviser to the group.
The European Union, the US Congress and state legislatures are also considering measures that could help garment workers by making supply chains more transparent, but none is seen by labor advocates as a cure-all. Garment companies are awaiting new rules from the EU that will require them to make public their suppliers' names, though it's unclear how the use of subcontractors will be policed. In Congress and in the New York State Legislature, lawmakers are considering similar proposals that would require brand companies to disclose their supply chains, but those measures aren't likely to become law anytime soon.
Ultimately, consumers in the US and Europe are the biggest beneficiaries of the slow progress in protecting garment workers. “Most US-based consumers aren't going to be willing to pay more to know that a worker in the supply chain is going to get paid a living wage,” says Boudreau, the economics professor. “Not because people are bad, necessarily. They just don't have the income to make that trade-off, or they may not be educated about the conditions.”
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