Bangladesh's Forgotten Apparel Workers

43 Pages·2015·7.53 MB·English

Beyond the Tip of the Iceberg:
Bangladesh’s Forgotten
Apparel Workers
SARAH LABOWITZ AND DOROTHÉE BAUMANN-PAULY
DECEMBER 2015
“At NYU Stern, we develop people and ideas that transform the challenges of the 21st
century into opportunities to create value for business and society. The Center for Business
and Human Rights is the embodiment of that mission.”
Peter Henry, Dean
NYU Stern School of Business
Launched in March 2013, the NYU Stern Center for Business and Human Rights is
the first human rights center based at a business school. Led by Michael Posner and
Sarah Labowitz, the Center is rising to meet one of today’s most essential business
questions: what is business’ responsibility to the people and communities it touches
in the most difficult corners of the planet?
The Center offers dedicated courses on business and human rights to MBA and
undergraduate business students. In different business sectors, it undertakes pro-
jects that combine original research, convening stakeholders, and public advocacy. It
seeks to make seemingly intractable problems accessible to business and create pos-
sibilities for action to improve human rights in the toughest business environments.
The Center is an independent academic endeavor of NYU Stern. It receives funding
from NYU Stern, philanthropic foundations, and individuals.
More information at http://bhr.stern.nyu.edu.
Cover image: A young worker at her working station removes extra stitches from blue jeans in an informal
factory in Dhaka. claudio montesano casillas
NYU Stern Center for Business and Human Rights
Leonard N. Stern School of Business
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© 2015 NYU Stern Center for Business and Human Rights
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“Where, after all, do universal human rights begin? In small places, close
to home - so close and so small that they cannot be seen on any maps
of the world. Yet they are the world of the individual person; the neigh-
borhood he lives in; the school or college he attends; the factory, farm, or
office where he works. Such are the places where every man, woman, and
child seeks equal justice, equal opportunity, equal dignity without discri-
mination. Unless these rights have meaning there, they have little mea-
ning anywhere. Without concerted citizen action to uphold them close to
home, we shall look in vain for progress in the larger world.”
— Eleanor Roosevelt
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Contents
Acronyms and Organizations 3
Executive Summary 4
Recommendations 6
Introduction 13
Methodology 16
Findings: 19
1 — Size of the Sector 19
2 — Informal Subcontracting 23
3 — Accord and Alliance 26
4 — Fixing Factories 28
Appendix I – Field Survey Questions 30
Appendix II – Funding and Financing for the 31
Garment Sector in Bangladesh
Endnotes 34
Acknowledgements 38
About the Authors 39
Summary of Key Data 41
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ACRONYMS AND ORGANIZATIONS
Acronyms and Organizations
Government of Bangladesh
Department of Inspections for Factories and Establishments DIFE
Trade Associations
Bangladesh Garment Manufacturers and Exporters Association BGMEA
Bangladesh Knitwear Manufacturers and Exporters Association BKMEA
Factory Safety Programs — Foreign Brands
Bangladesh Accord for Fire and Building Safety Accord
Alliance for Bangladesh Worker Safety Alliance
International Organizations
International Labor Organization ILO
International Finance Corporation IFC
Organisation for Economic Co-operation and Development OECD
Other Key Terms
Ready-Made Garments RMG
Utilization Declaration UD
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EXECUTIVE SUMMARY
Executive Summary
This report is the second study by the increase and decrease its production
NYU Stern Center for Business and Hu- in response to shifting demand, or
man Rights on working conditions and the thousands of small factories that
the garment industry in Bangladesh. comprise the indirect sector enable
It is the result of a large-scale data direct exporters to accommodate
analysis of factory data that the Center significant shifts.
collected and analyzed from publicly
available sources and a field survey 2. In a June 2015 survey of two
conducted in June 2015. The Center’s sub-districts of Dhaka, 32% of
analysis sheds light on an important, the 479 factories surveyed were
but opaque part of the garment sector: informal subcontractors. 91% of
indirect suppliers. informal factories produced at
least partly for export. Informal
Indirect sourcing is key to Bangladesh’s factories are a subset of indirect
high-volume, low-cost model of garment suppliers. They do not register with
production. Many workers are em- the government, either of the two
ployed in factories that supply foreign national trade associations of appa-
brands indirectly through other, larger rel manufacturers, or foreign brands.
factories or agents. Indirect sourcing Workers in this part of the sector
factories operate on very tight margins are especially vulnerable because
and with very little oversight, increasing they are invisible to regulators and
the vulnerability of workers to safety their employers operate on such
violations and labor rights abuses. slim margins that they cannot invest
in even basic safety equipment or
procedures. This kind of subcontrac-
Our research reveals five key findings: ting also artificially depresses prices
because it does not account for the
1. There are more than 7,000 fac- full cost of producing in accordance
tories producing for the export with minimum labor standards.
market in Bangladesh, divided
between direct and indirect sour- 3. The Bangladesh Accord for Fire
cing factories. Previous estimates of and Building Safety (Accord)
the size of the sector accounted for and the Alliance for Bangladesh
4,000 – 4,500 factories. The report Worker Safety (Alliance) – two
shows that the universe of factories factory safety programs initiated
producing for export is much larger by more than 200 foreign brands
than previously understood, and – encompass only 27% of factories
that indirect sourcing factories are in Bangladesh. The programs have
a significant driver of production received significant public attention
and employment. From 2013 to and have announced a commitment
2015, while the number of direct to spend up to US$100 million over
exporters remained constant, total five years to improve factory safety.
apparel export volumes fluctuated But they are narrowly focused on
substantially. This can be explained a subset of direct suppliers. Almost
in one of two ways: either each di- three million workers are not cove-
rect exporter is able to dramatically red by these programs.
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EXECUTIVE SUMMARY
4. Despite thousands of inspections, 5. More than US$280 million in com- the thousands of indirect suppliers
very few factories have actually mitments have been announced that remain in the shadows. There
been fixed. Almost all direct expor- for the garment sector in Bangla- is not yet a clear understanding of
ting factories have been inspected desh since Rana Plaza. While it is what it will take to ensure that wor-
by the Accord, the Alliance, or the significant that foreign governments, kers in these factories are safe and
government and the International development organizations, phi- enjoy basic labor rights.
Labor Organization (ILO). But of the lanthropies, and foreign brands are
3,425 inspections that have taken announcing large commitments, it
place, only eight factories have pas- is not yet clear how many of these
sed final inspection. This report does resources are being spent or if any of
not examine why factory remedia- this money is being applied to reme-
tion has been so slow, but it is clear diate factories. It is clear that resour-
that something does not add up. ces are not being directed towards
The Rana Plaza factory complex housed five garment factories, in addition to a bank and retail shops. It collapsed on the morning of April 24, 2013, killing almost 1,200 gar-
ment workers. The collapse resulted from a combination of poor infrastructure, weak oversight, and unscrupulous management practices. Rescue workers carry a garment
worker who survived after being trapped under the rubble three days after the collapse, on April 26, 2013. reuters/andrew biraj
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RECOMMENDATIONS
Recommendations
Achieving visibility over the full supply • To local manufacturers: Increase
1. Acknowledge
chain at a systemic level, rather than transparency about the practice of
the full scale and in the context of each individual fo- indirect sourcing and its role in the
reign brand, is a precondition for more production process.
complexity of completely fulfilling the rights of all of
Bangladesh’s apparel workers.
indirect sourcing • To the government of Bangladesh
and the trade associations: Make
• To foreign brands: Reverse the incen- information available about regula-
tives for primary business partners tory systems that apply to direct and
away from a punitive system that indirect suppliers.
punishes subcontracting to one that
rewards transparency about the prac-
tice. Prioritize understanding where • To foreign governments and inter-
product actually is being produced. national organizations: Put indirect
sourcing on the global agenda about
Brands can play an important role supply chains, including the G-7
in legitimizing indirect suppliers as agenda, the ILO’s meeting on supply
an important source of producti- chains in 2016, the World Economic
ve capacity, but one that requires Forum, and the OECD’s guidance
new approaches for oversight and efforts for companies in the apparel
compliance with labor standards. This and footwear sectors.1
does not mean that brands bear sole
responsibility for remediating or even
monitoring conditions in indirect
suppliers. But brands can and should
lead in setting a new tone about indi-
rect sourcing that creates space for
other stakeholders to take action.
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RECOMMENDATIONS
2. Identify the
The mapping of 7,000 factories and the • To private philanthropies, in part-
true size of
survey of two sub-districts in Dhaka nership with the MissingMaps2
presented in this report and the accom- project and Bangladeshi civil so-
Bangladesh’s
panying map are an important first step ciety: create a parcel map of Dhaka
in identifying the full scale of garment and Chittagong.
export garment
production in Bangladesh. But more and
sector better data is required to identify the The creation of a parcel map of Dhaka
full extent of the sector. would enable factory surveyors to
associate their findings with indivi-
dual parcels, including information
• To the ILO, in cooperation with such as factory names, conditions,
the trade associations, unions, and and images with specific geographic
the government of Bangladesh: areas.3 Such a map would: address
Conduct a comprehensive survey of the problem of poor availability of
direct and indirect sourcing in Dhaka map information for Bangladesh;
and Chittagong. support a factory survey; and be use-
ful in many other humanitarian and
The ILO should allocate personnel development contexts.
and financial resources under its
existing RMG program to underwri-
te a comprehensive survey. The go-
vernment and the trade associations
should authorize and fully endorse
the survey to encourage openness
on the part of all factories, especially
informal and indirect suppliers.
In our comprehensive survey of Ton-
gi and Rampura, it took six surveyors
three full days to identify almost 500
factories, working in three teams.
With the same small team, it would
take about 42 work days to identify
all garment factories in Bangladesh,
or just over two months.
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RECOMMENDATIONS
3. Regulate and
A dynamic, sustainable garment sector for boosting the industry’s repu-
create incenti-
would fairly distribute the costs of labor tation by helping smaller factories
rights compliance across all firms in comply with new standards. If 250
ves to formalize
the sector, not just those that maintain responsible manufacturers could
direct relationships with foreign brands each monitor and mentor 10 smaller
indirect factories
that demand compliance as part of the factories on compliance issues,
price of doing business. that would then alter the reality for
2,500 factories.4
• To the government of Bangladesh:
Improve enforcement in the indirect • To international financial institu-
exporting part of the sector. tions and the government of Ban-
gladesh: Undertake infrastructure
Raising the odds of inspection and development in electricity, transpor-
even prosecution for labor rights tation, and gas.
and safety violations (in addition to
other regulatory obligations, such as Indirect suppliers rely on the under-
taxation and business registration) developed public infrastructure grid,
among indirect suppliers would leaving them especially vulnerable
discourage firms from remaining to electrical fires. Corruption at
informal and encourage factories to the highest levels of government
meet minimum standards of labor prevented Bangladesh from recei-
rights and worker protection. ving World Bank funding for a major
bridge project in 2012.5 Since then,
the World Bank has pulled back
• To direct suppliers: Help indirect from funding the kind of large-scale
exporters formalize through a “bu- infrastructure projects that would
ddy system.” help lower costs across all factories
in Bangladesh.
Working through a buddy system, di-
rect suppliers could transfer knowle- The government should investigate
dge and potentially resources to help and prosecute corruption allegations
small- and medium-sized subcon- to restore confidence among interna-
tracting factories achieve minimum tional lenders, in addition to fulfilling
standards for labor rights and safety its commitment to spend fully wire
compliance. Rubana Huq, managing residential electrical infrastructure.6
director of Mohammadi Group, sug- International lenders should reconsi-
gested such a system in a 2014 Wall der policies that restrict financing for
Street Journal op-ed: “Every stronger infrastructure projects.
factory should assume responsibility
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