Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza : UNI Global Union and IndustriALL Respond 26 th May 2014 1 Introduction One month ago, the Stern Center for Business and Human Rights at New York University issued a research report titled "Business as Usual Is Not an Option: Supply Chains and Sourcing after Rana Plaza". While some of its conclusions echo the longstanding concerns of the labour movement about the apparel industry s practices in Bangladesh, the global unions which are labour signatories to the Accord on Fire and Building Safety in Bangladesh believe that it is necessary to correct two central errors in the Report, which have been widely reported. The Report s conclusions about the need for brands to establish more direct and long term buying relations with factories, the need for the government of Bangladesh to assume responsibility for properly regulating garment production, and the need for factories to be given economic incentive to comply with the dictates of safety inspectors are all well-grounded in the realities of the industry and consistent with what labour advocates have argued for many years. However, in their assessment of the dangers facing workers in Bangladesh and in their analysis of the Accord, the authors badly miss the mark. The Report makes two key misstatements about the Accord, which reflect poorly on the quality of the research or suggest bias on the part of the authors and which lead both to faulty recommendations and to the erroneous conclusion that the Accord and the Alliance for Bangladesh Worker Safety are similar agreements. First, the Report claims that the Accord does not cover factories which are not in a direct sourcing relationship with the brands, which the authors argue are the factories at greatest risk. Second, contrary to clear the text of the Accord and the official interpretation of the Accord s governance body, the authors assert that the 1/5
Accord creates no obligation for signatory brands to assist factory owners with the cost of safety renovations and, for all practical purposes, puts the burden of repair on factory owners. As will be discussed below, these claims are simply untrue. The Report also concludes, erroneously, that the biggest safety risk to workers in Bangladesh is at smaller subcontract factories that have escaped the auditing programs of brands and retailers. This is a major error and it leads to dangerously misguided recommendations. While the authors argue for a break with business as usual, their conclusions and recommendations are likely to have the opposite effect. They assert that sweeping new efforts to inspect and renovate factories including the Accord, which requires its signatory brands to make a fundamental departure from their usual practices are on the wrong track and will not make a difference. This cynical conclusion gives cover to brands who would prefer to do nothing but wait for the Bangladeshi government to step up to do its job, a refrain the advocates for the Accord hear every day from recalcitrant companies. And it does not give sufficient credit to those brands that, by signing the Accord, have not just promised to end business as usual, but have made a contractually enforceable commitment to do so: by signing a binding agreement with unions that obligates them to ensure that resources are available for all necessary safety renovations and upgrades. 2 Subcontracting/ Alleged Inadequacy of Coverage The Report claims that main challenge to worker safety in Bangladesh is indirect sourcing, or subcontracting to higher risk factories, and further that these factories are not covered by any agreement. (" Neither the Accord nor the Alliance addresses the role of indirect sourcing practices in their members supply chains " (p10) Neither is targeting the most vulnerable factories producing for the export market. The Accord... inspection and remediation regime is unlikely to reach the factories where workers are most at risk. (p. 23) There are several problems with this argument: First, the Accord does cover factories that produce garments for Accord brands through subcontracts from other suppliers. This is one of the agreement s most crucial features. Indeed, under the Accord, the nature of the relationship between the brand and the factory, no matter how indirect, can never be a basis for avoiding responsibility: if a factory is producing the garments of an Accord brand, then the brand is responsible for that factory. Even in cases where the brand is unaware that its goods are at a factory so-called unauthorized subcontracting the obligations still apply: if workers, unions, independent researchers or journalists identify the brand s production at the factory, the brand must then assume responsibility. According to the Disclosure Protocol approved by the Accord Steering Committee, per the terms of the Accord, all factories in Bangladesh producing products for the signatory companies, including subcontractors, are covered by the Accord and must be disclosed. The Accord has created a publicly accessible database of factories covered by the agreement accompanied by a protocol that enables this list to be augmented to include factories later discovered to be producing for a signatory brand. Under the protocol every supplier producing for an Accord signatory must go on the list from the moment an order is placed. If there is unauthorised subcontracting that is then discovered, that facility also goes on the list and must be inspected and remediated as per Accord requirements. It is inevitable that some factories producing for Accord brands will escape the agreement s reach, through subterfuge of one form or another; however, the agreement s 2/5
broad scope and strong obligations for signatories ensure that these will be small in number. The Accord thus does address the role of indirect sourcing practices in its signatories supply chains. To claim otherwise is to misread the agreement. And to argue that the Accord will be ineffective, merely because some factories will inevitably escape scrutiny, is to make the perfect the enemy of the good. With more than 1,600 factories on the Accord s current list, employing more than 2 million workers, it is not credible to suggest that this effort is too small to make a difference. Second, the claim that the greatest safety risk lies with subcontractors misstates the reality and gives the impression that the factories with a direct relationship are operating safely enough and that their inspection should be deferred until greater risks are handled. The Report in fact recommends that current efforts should instead be directed at the subcontractors, which struggle to implement even basic safety standards, such as fire extinguishers. (p. 19). The suggestion that fire extinguishers are the answer is deeply misguided: Indeed, most of the factories which have been audited by the brands over the years do have fire extinguishers. Unfortunately, fire extinguishers can t prevent building collapses, open locked gates or create proper fire exits. As a result, more 1,300 workers have died, in the last four years, in factories that had openly acknowledged sourcing relationships with major brands and had been subjected to safety audits by those brands or others acting on their behalf audits that in many cases did a fine job of ensuring that fire extinguishers were present, but ignored entirely the far more important safety hazards that later took workers lives. It is important to bear in mind that almost all of the major factory disasters in recent years in Bangladesh occurred in factories that were recognized producers for major brands and had been repeatedly inspected by them. The safety deficiencies in the Bangladesh garment industry are the product of years of inadequate oversight, both by the government and by the brands, and they are widespread affecting large factories and small, direct suppliers and subcontractors, newer facilities and older ones. Virtually none of the garment factories in Bangladesh even have fire doors. The claim that the factories with more direct relationships with brands are basically okay is both inaccurate and dangerous. The Accord engineers have, as of the time of this writing, already identified buildings at risk of collapse which house factories that are acknowledged producers for major bands. With the Accord inspection program less than one fifth complete, ten factories have already been evacuated pending renovations, protecting the safety of close to 20,000 workers and many others have been forced to make immediate changes to reduce risk. Should these inspection efforts, which may well prevent the next Rana Plaza, be halted and redirected to making sure that small factories have fire extinguishers? The Report s final recommendation that safety inspections should take place only after a thorough inventory of the existing factory base, in order to refocus efforts on the factories where the authors see the greatest risk would result only in more delay in the real work of identifying and eliminating safety hazards and in more tragedy for garment workers. It is also important to note that the Report s figure for the total number of export garment factories in Bangladesh 5,000 to 6,000 is questionable. The Bangladesh s government public list of factories totals less than 3,500. Determining the correct number of factories is more difficult than it might seem, but with more than two million workers employed in factories that are on the Accord factory list, out of roughly four million workers in total, it is clear that the Accord covers a vast portion of the Bangladeshi garment sector. The Report s argument that the Accord is dealing with only a relatively small group of less dangerous factories, while ignoring the bulk of the industry, is wrong. 3/5
3 Remediation/Factory Renovations The Report claims that the brands which are signatories to the Accord are not responsible for financing renovations in these factories, where deemed necessary by Accord inspectors. This is incorrect. The Accord has clear language on this matter, language which was considered the most important and difficult to negotiate: In order to induce Tier 1 and Tier 2 factories to comply with upgrade and remediation requirements of the program, participating brands and retailers will negotiate commercial terms with their suppliers which ensure that it is financially feasible for the factories to maintain safe workplaces and comply with upgrade and remediation requirements instituted by the Safety Inspector. Each signatory company may, at its option, use alternative means to ensure factories have the financial capacity to comply with remediation requirements, including but not limited to joint investments, providing loans, accessing donor or government support, through offering business incentives or through paying for renovations directly. (Accord, Paragraph 22, emphasis added.) This paragraph was interpreted by the Steering Committee of the Accord, which includes both brand and labour signatories, in its Implementation Report, issued in July, 2013. Safety Improvements. Brand signatories are responsible to ensure that sufficient funds are available to pay for renovations and other safety improvements as directed by the Safety Inspector. Such funds may be generated through negotiated commercial terms, joint investment, direct payment for improvements, government and other donor support or any combination of these mechanisms. Strangely, the Report never cites the language of Paragraph 22 of the Accord, which concerns the obligation to pay for remediation, instead using quotes from other, unrelated provisions. It ignores the Implementation Report entirely. To support its conclusion, the Report relies on a single quote in the media from a member of the Accord staff (who was not interviewed for the Report), which suggests that the responsibility falls to the factories, in the first instance. The Report researchers were told by at least one member of the Accord Steering Committee that this quote did not reflect Accord policy, and was possibly a misquote entirely. This quote, coupled with alleged confusion on the part of factory owners, are an insufficient basis upon which to reinterpret the Accord in such a dramatic manner. It is true that factories are understandably concerned that they will bear the burden to finance repairs and brands are not eager to advertise their responsibility, since in some cases it will be feasible for the factories to pay and brands want to avoid paying more than they have to. The language does not foresee that the brands will pay every cent of remediation. However, the language of the Accord is clear. It has not been diluted or reinterpreted. The labour signatories are fully committed to enforcing this provision and have made this clear to both the brands and, indeed, the authors of the Report. It is our expectation that, although the factories may be able to finance some of the expenses of remediation, in large part the remediation will be financed by the brands, using the various means listed in the Accord. While we recognise that the Accord has work to do in order to implement and enforce the unprecedented financial obligations of the signatory, it is not acceptable for a Report of 4/5
this stature to conclude, without any evidence apart from the perceptions of some factory owners and a single quote in the media, that the Accord does not require financial support for remediation from its signatories and that, in this regard, the Alliance and Accord are the same. This faulty analysis is offered to support the Report s recommendation for a pooled fund for remediation. This is entirely impractical, since there is no way to estimate accurately how much money will be needed and since the Alliance signatories have not made any commitment to provide financial resources for remediation, utilizing only a voluntary loan program, and are very unlikely to be willing to make meaningful contributions to such a fund. Indeed, it is not clear that the authors of the Report actually favour imposing the primary financial obligation on the brands. They claim that it is unfathomable that the government of Bangladesh and the private sector can do this alone. (emphasis added). The international community foreign governments, the World Bank, and other multilateral institutions need to step up as well. (p. 7) It is actually entirely fathomable that the private sector can afford the cost of making factories in Bangladesh safe. Western brands and retailers will source apparel from Bangladesh over the next five years worth around half of a trillion dollars (US) at retail price. The cost of necessary safety upgrades in all of the factories, even considering the highest estimates, is far less than one percent of that amount. The effect of the author s erroneous conclusions and misguided recommendations is actually to discourage brands and retailers from paying for factory renovations by telling those involved with the Accord that they have no such obligation (when in fact they do) and by telling all of the brands and retailers that they should look to governments for help instead of shouldering the responsibility themselves. The effort of the Report s authors to shed greater light on the situation in Bangladesh is welcome, but serious inaccuracies mar their work and reduce the value of their contribution. 5/5