Center for Business and Human Rights Respond
TISCH HALL
40 WEST FOURTH STREET, SUITE 400
NEW YORK, NY 10012-1118
STERN.NYU.EDU/BHR
SARAH LABOWITZ AND DOROTHÉE BAUMANN-PAULY
Center for Business and Human Rights
NYU Stern School of Business
June 3, 2014
Richard P. Appelbaum
MacArthur Chair in Sociology and Global & International Studies
University of California at Santa Barbara
Dear Professor Appelbaum,
We are writing to respond to your May 22 letter to Professor Michael Posner about the NYU Stern report1 on the apparel supply chain and workers’ rights in Bangladesh that we co-authored. We welcome your feedback to our report, and are encouraged by the wide interest in these issues within the academic community. At the same time, we believe that a number of your comments and characterizations are factually inaccurate or inconsistent with the report’s content.
Three areas in particular illustrate these inaccuracies and inconsistencies: 1) your characterization of our report as downplaying or obscuring the role and responsibility of global brands in ensuring factory safety in their supplier factories; 2) your assertion that subcontracting facilities present a lower risk of factory safety and labor rights violations than those factories that maintain direct relationships with foreign buyers; and 3) your mischaracterization of our assessment of the Accord and Alliance.
First, you write that “the report’s authors focus their criticism of business practices in Bangladesh’s apparel industry not primarily on Western brands, but on the local factory owners and buying agents who are these companies’ suppliers” and that the report “obscures the central role of brand practices.” This is not accurate.
A significant portion of our report is focused on problems inherent in the structure of the business model of Western brands and their suppliers. Our original research in this area makes clear the link between business practices, weak respect for workers’ rights, and significant factory safety risks. These practices originate from business decisions made by brands, retailers, and their suppliers; they are maintained because they benefit these industry participants, albeit at considerable risk to worker safety and rights. The report is a critique of a supply chain “driven by the pursuit of the lowest nominal costs” in which “global brands and national-level suppliers in Bangladesh benefit from an indirect sourcing model that relies on the routine practice of subcontracting, often through agents and in a manner that is not transparent to buyers and regulators.”
We criticize global brands for their lack of candor about the true scope of their supply chains, arguing, “Brands should prioritize transparency, rather than continuing empty rhetoric about policies against ‘unauthorized’ subcontracting.” We urge global brands and retailers to make long-term business commitments to Bangladesh. And we recommend that all of the brands doing business in Bangladesh contribute to a joint fund with independent oversight that will underwrite the costs of factory repairs and remediation.
Second, we do not understand your apparent dismissal of our concerns about worker safety issues in the thousands of subcontracting factories that have been the engine of Bangladesh’s low-cost, high-volume garment sector, and a major contributing factor to poor working conditions. As our report makes clear, these factories operate on razor thin margins and are removed from oversight for factory safety or labor rights. They operate in the shadows, greatly increasing risks for workers. While the prevalence of non-transparent subcontracting has been widely reported in the news media and by civil society, including in the tragedies at Tazreen and Rana Plaza, our report provides a new level of understanding about the drivers and modalities of the practice.
You assert that “All of the major disasters that have occurred in the region’s garment factories in recent years occurred in factories that were known by major brands to have produced their goods and had been repeatedly subject to labor rights audits conducted for some of these same buyers.” We don’t agree with this. Reporting by the news media and civil society confirms our report’s findings – that the garment factories in the most high profile factory disasters did a mix of subcontracting and direct work, often through agents, with limited transparency and oversight.
The Wall Street Journal’s coverage following the Rana Plaza collapse summarizes the role of indirect sourcing at the factories in the Rana Plaza complex, using Benetton as an example: “At first, [Benetton] denied having any relationship at all with New Wave Style. That initial confusion exposes the complexities of a global supply chain in which retailers assemble sprawling networks of contractors and middlemen…The tangled networks also make it difficult to assess blame when something goes wrong.”2
Tazreen and Rana Plaza are stark illustrations of the consequences of a system in which brands maintain a sincere or willful ignorance of where their garments are produced. The fact that these facilities had been subject to audits at some point in time does not answer or refute our report’s overall finding about the prevalence and risks of non-transparent subcontracting. The financial and production incentives that drive manufacturing for major brands into unknown facilities are very powerful. We squarely criticize this lack of transparency in the report and make recommendations for strengthening sourcing relationships and increasing oversight at all levels of the supply chain.
Your assertion that the Accord’s “requirements apply to any factory that produces the goods of any signatory brand – regardless of layers of subcontracting involved” is not playing out in practice. The factory lists for both the Accord and the Alliance encompass 1,894 factories out of the 5,000 – 6,000 factories and facilities we estimate are producing for the export garment sector. It is not credible that these lists include all of the layers of subcontractors producing for Accord and Alliance brands. Moreover, there are few incentives for first -tier suppliers to come forward with their actual list of subcontractors, or for workers or unions to identify their employers. The brands’ zero-tolerance policies for “unauthorized” subcontracting drive the practice further underground. These are serious shortcomings that we identify in the report and call on both the Accord and the Alliance to address.
We have never suggested that there are not serious safety and labor rights issues in first-tier suppliers. Initial inspections under the Accord and the Alliance confirm a range of significant problems in these factories. But there also is little doubt that the widespread practice of non-transparent subcontracting increases risks for workers. As a recent report by the International Federation for Human Rights and Bangladesh Odhikar concludes, “Sometimes sub-contracting practices are such that global brands do not know which factories are at the start of the production chain and whether or not these respect the rights of their employees. Generally speaking, it is in the factories at the very start of the supply chain where the risks for human rights violations are the greatest.” 3 We cannot agree with your statement that “it is utterly at odds with the facts” that “subcontracting factories are more dangerous than those producing directly for brands.”
We are very concerned about the rights of workers in subcontracting and unregistered facilities. We believe you share our concern for these workers and urge you to push the Accord, the Alliance, the ILO, and the government of Bangladesh to devote resources and develop policies that prioritize bringing these factories out of the shadows and into a stronger and more transparent system of sourcing and oversight.
Finally, the majority of your letter addresses our assessment of the Accord and the Alliance and your assertion that the Accord is fundamentally different than the Alliance. We respectfully disagree. As we conclude in the brief section devoted to the Accord and the Alliance in our report, while there are differences between the two initiatives, their similarities outweigh their differences, and in key aspects neither agreement is sufficient.
As noted above, neither agreement adequately addresses the indirect sourcing practices of their members’ supply chains. But most importantly, neither the Accord nor the Alliance has developed a clear or adequate strategy for financing factory repairs that will be identified in the inspections that are now underway.
The question of who will pay to remediate the shortcomings in fire and building safety identified in inspections is already the subject of debate. You assert that “the Accord includes a clear mandate for signatory companies to provide needed financial assistance to factories for the cost of repairs.” We understand that this is the strongly held belief of many who negotiated the Accord and have advocated for its adoption by companies and universities. Yet we are not aware of a single company in the Accord (or the Alliance) that has made a similar public statement or commitment.
The language that was ultimately agreed upon in the text of the Accord is ambiguous about who pays, leaving it to a negotiation between factory owners and buyers. Accord staff have acknowledged this ambiguity in public comments, which we quote in the report. A recent story in The Guardian quotes Jenny Holdcroft, policy director for IndustriALL, as saying, “This was always going to be a topic of negotiation. Brands don’t want to commit to paying so that rich factory owners who have just pocketed the profits and not been spending on their factories for years continue to do so.”
The ambiguity in the Accord has resulted in understandable confusion and frustration among factory owners. As reported in The Guardian, the Accord is “facing the threat of legal action as factory owners demand compensation for the cost of closures and repair work. With some repair programs expected to take months, factory owners say they cannot shoulder the costs of paying staff while factories are closed, alongside the expense of some major works needed to ensure buildings are safe.”
Our analysis concludes that the negotiation of “commercial terms” that you cite in the text of the Accord will ultimately mean that in most cases, factory owners – not brands – will be under considerable pressure to pay the costs of repairs and lost wages if they want to maintain existing business. Factory owners have articulated this concern, but no clear answer is forthcoming.
To be sure, our report is critical of the current landscape, including the sourcing and production practices of global and national companies, government regulatory policies and enforcement, foreign funding priorities, and private governance initiatives. We understand how difficult it is to make lasting improvements in the supply chain, and acknowledge the efforts of many good people working to make progress in a challenging environment. Our objective is to contribute to these efforts by pointing out important gaps and ambiguities at an early stage. These issues require further attention and action in order to achieve the shared goal of a garment sector in Bangladesh that is sustainable for companies and for workers.
Going forward, we encourage you and the other co-signatories of your letter to convey your questions and comments about our report directly to us. We are eager to engage with you and others in the academic community interested in advancing human rights in global business operations. Our report is the first major human rights report published by a business school, which we think represents an important innovation in business education. We look forward to continuing to bring this new perspective to the effort to improve working conditions in global supply chains.
Sincerely,
Sarah Labowitz
Co-director and Research Scholar Center for Business and Human Rights NYU Stern School of Business
Dorothée Baumann-Pauly Research Director
Center for Business and Human Rights NYU Stern School of Business
1 Available at: http://www.stern.nyu.edu/sites/default/files/assets/documents/con_04740…
2 Syed Zain Al-Mahmood, Christina Passariello, Preetika Rana, “The Global Garment Trail: From Bangladesh to a Mall Near You,” Wall Street Journal, May 3, 2013, http://online.wsj.com/news/articles/SB100014241278873247666045784608338….
3 “One Year After the Rana Plaza Catastrophe : Slow Progress and Insufficient Compensation,” International Federation for Human Rights and Bangladesh Odhikar, April 24, 2014, http://www.fidh.org/en/globalisation-human-rights/15179-one-year-after-….
4 Sarah Butler, “Bangladesh factory owners threaten inspection agencies with legal action,” the Guardian, May 26, 2014, http://www.theguardian.com/world/2014/may/26/bangladesh-clothing-factory-safety-agreement-compensation-closures.
40 WEST FOURTH STREET, SUITE 400
NEW YORK, NY 10012-1118
STERN.NYU.EDU/BHR
SARAH LABOWITZ AND DOROTHÉE BAUMANN-PAULY
Center for Business and Human Rights
NYU Stern School of Business
June 3, 2014
Richard P. Appelbaum
MacArthur Chair in Sociology and Global & International Studies
University of California at Santa Barbara
Dear Professor Appelbaum,
We are writing to respond to your May 22 letter to Professor Michael Posner about the NYU Stern report1 on the apparel supply chain and workers’ rights in Bangladesh that we co-authored. We welcome your feedback to our report, and are encouraged by the wide interest in these issues within the academic community. At the same time, we believe that a number of your comments and characterizations are factually inaccurate or inconsistent with the report’s content.
Three areas in particular illustrate these inaccuracies and inconsistencies: 1) your characterization of our report as downplaying or obscuring the role and responsibility of global brands in ensuring factory safety in their supplier factories; 2) your assertion that subcontracting facilities present a lower risk of factory safety and labor rights violations than those factories that maintain direct relationships with foreign buyers; and 3) your mischaracterization of our assessment of the Accord and Alliance.
First, you write that “the report’s authors focus their criticism of business practices in Bangladesh’s apparel industry not primarily on Western brands, but on the local factory owners and buying agents who are these companies’ suppliers” and that the report “obscures the central role of brand practices.” This is not accurate.
A significant portion of our report is focused on problems inherent in the structure of the business model of Western brands and their suppliers. Our original research in this area makes clear the link between business practices, weak respect for workers’ rights, and significant factory safety risks. These practices originate from business decisions made by brands, retailers, and their suppliers; they are maintained because they benefit these industry participants, albeit at considerable risk to worker safety and rights. The report is a critique of a supply chain “driven by the pursuit of the lowest nominal costs” in which “global brands and national-level suppliers in Bangladesh benefit from an indirect sourcing model that relies on the routine practice of subcontracting, often through agents and in a manner that is not transparent to buyers and regulators.”
We criticize global brands for their lack of candor about the true scope of their supply chains, arguing, “Brands should prioritize transparency, rather than continuing empty rhetoric about policies against ‘unauthorized’ subcontracting.” We urge global brands and retailers to make long-term business commitments to Bangladesh. And we recommend that all of the brands doing business in Bangladesh contribute to a joint fund with independent oversight that will underwrite the costs of factory repairs and remediation.
Second, we do not understand your apparent dismissal of our concerns about worker safety issues in the thousands of subcontracting factories that have been the engine of Bangladesh’s low-cost, high-volume garment sector, and a major contributing factor to poor working conditions. As our report makes clear, these factories operate on razor thin margins and are removed from oversight for factory safety or labor rights. They operate in the shadows, greatly increasing risks for workers. While the prevalence of non-transparent subcontracting has been widely reported in the news media and by civil society, including in the tragedies at Tazreen and Rana Plaza, our report provides a new level of understanding about the drivers and modalities of the practice.
You assert that “All of the major disasters that have occurred in the region’s garment factories in recent years occurred in factories that were known by major brands to have produced their goods and had been repeatedly subject to labor rights audits conducted for some of these same buyers.” We don’t agree with this. Reporting by the news media and civil society confirms our report’s findings – that the garment factories in the most high profile factory disasters did a mix of subcontracting and direct work, often through agents, with limited transparency and oversight.
The Wall Street Journal’s coverage following the Rana Plaza collapse summarizes the role of indirect sourcing at the factories in the Rana Plaza complex, using Benetton as an example: “At first, [Benetton] denied having any relationship at all with New Wave Style. That initial confusion exposes the complexities of a global supply chain in which retailers assemble sprawling networks of contractors and middlemen…The tangled networks also make it difficult to assess blame when something goes wrong.”2
Tazreen and Rana Plaza are stark illustrations of the consequences of a system in which brands maintain a sincere or willful ignorance of where their garments are produced. The fact that these facilities had been subject to audits at some point in time does not answer or refute our report’s overall finding about the prevalence and risks of non-transparent subcontracting. The financial and production incentives that drive manufacturing for major brands into unknown facilities are very powerful. We squarely criticize this lack of transparency in the report and make recommendations for strengthening sourcing relationships and increasing oversight at all levels of the supply chain.
Your assertion that the Accord’s “requirements apply to any factory that produces the goods of any signatory brand – regardless of layers of subcontracting involved” is not playing out in practice. The factory lists for both the Accord and the Alliance encompass 1,894 factories out of the 5,000 – 6,000 factories and facilities we estimate are producing for the export garment sector. It is not credible that these lists include all of the layers of subcontractors producing for Accord and Alliance brands. Moreover, there are few incentives for first -tier suppliers to come forward with their actual list of subcontractors, or for workers or unions to identify their employers. The brands’ zero-tolerance policies for “unauthorized” subcontracting drive the practice further underground. These are serious shortcomings that we identify in the report and call on both the Accord and the Alliance to address.
We have never suggested that there are not serious safety and labor rights issues in first-tier suppliers. Initial inspections under the Accord and the Alliance confirm a range of significant problems in these factories. But there also is little doubt that the widespread practice of non-transparent subcontracting increases risks for workers. As a recent report by the International Federation for Human Rights and Bangladesh Odhikar concludes, “Sometimes sub-contracting practices are such that global brands do not know which factories are at the start of the production chain and whether or not these respect the rights of their employees. Generally speaking, it is in the factories at the very start of the supply chain where the risks for human rights violations are the greatest.” 3 We cannot agree with your statement that “it is utterly at odds with the facts” that “subcontracting factories are more dangerous than those producing directly for brands.”
We are very concerned about the rights of workers in subcontracting and unregistered facilities. We believe you share our concern for these workers and urge you to push the Accord, the Alliance, the ILO, and the government of Bangladesh to devote resources and develop policies that prioritize bringing these factories out of the shadows and into a stronger and more transparent system of sourcing and oversight.
Finally, the majority of your letter addresses our assessment of the Accord and the Alliance and your assertion that the Accord is fundamentally different than the Alliance. We respectfully disagree. As we conclude in the brief section devoted to the Accord and the Alliance in our report, while there are differences between the two initiatives, their similarities outweigh their differences, and in key aspects neither agreement is sufficient.
As noted above, neither agreement adequately addresses the indirect sourcing practices of their members’ supply chains. But most importantly, neither the Accord nor the Alliance has developed a clear or adequate strategy for financing factory repairs that will be identified in the inspections that are now underway.
The question of who will pay to remediate the shortcomings in fire and building safety identified in inspections is already the subject of debate. You assert that “the Accord includes a clear mandate for signatory companies to provide needed financial assistance to factories for the cost of repairs.” We understand that this is the strongly held belief of many who negotiated the Accord and have advocated for its adoption by companies and universities. Yet we are not aware of a single company in the Accord (or the Alliance) that has made a similar public statement or commitment.
The language that was ultimately agreed upon in the text of the Accord is ambiguous about who pays, leaving it to a negotiation between factory owners and buyers. Accord staff have acknowledged this ambiguity in public comments, which we quote in the report. A recent story in The Guardian quotes Jenny Holdcroft, policy director for IndustriALL, as saying, “This was always going to be a topic of negotiation. Brands don’t want to commit to paying so that rich factory owners who have just pocketed the profits and not been spending on their factories for years continue to do so.”
The ambiguity in the Accord has resulted in understandable confusion and frustration among factory owners. As reported in The Guardian, the Accord is “facing the threat of legal action as factory owners demand compensation for the cost of closures and repair work. With some repair programs expected to take months, factory owners say they cannot shoulder the costs of paying staff while factories are closed, alongside the expense of some major works needed to ensure buildings are safe.”
Our analysis concludes that the negotiation of “commercial terms” that you cite in the text of the Accord will ultimately mean that in most cases, factory owners – not brands – will be under considerable pressure to pay the costs of repairs and lost wages if they want to maintain existing business. Factory owners have articulated this concern, but no clear answer is forthcoming.
To be sure, our report is critical of the current landscape, including the sourcing and production practices of global and national companies, government regulatory policies and enforcement, foreign funding priorities, and private governance initiatives. We understand how difficult it is to make lasting improvements in the supply chain, and acknowledge the efforts of many good people working to make progress in a challenging environment. Our objective is to contribute to these efforts by pointing out important gaps and ambiguities at an early stage. These issues require further attention and action in order to achieve the shared goal of a garment sector in Bangladesh that is sustainable for companies and for workers.
Going forward, we encourage you and the other co-signatories of your letter to convey your questions and comments about our report directly to us. We are eager to engage with you and others in the academic community interested in advancing human rights in global business operations. Our report is the first major human rights report published by a business school, which we think represents an important innovation in business education. We look forward to continuing to bring this new perspective to the effort to improve working conditions in global supply chains.
Sincerely,
Sarah Labowitz
Co-director and Research Scholar Center for Business and Human Rights NYU Stern School of Business
Dorothée Baumann-Pauly Research Director
Center for Business and Human Rights NYU Stern School of Business
1 Available at: http://www.stern.nyu.edu/sites/default/files/assets/documents/con_04740…
2 Syed Zain Al-Mahmood, Christina Passariello, Preetika Rana, “The Global Garment Trail: From Bangladesh to a Mall Near You,” Wall Street Journal, May 3, 2013, http://online.wsj.com/news/articles/SB100014241278873247666045784608338….
3 “One Year After the Rana Plaza Catastrophe : Slow Progress and Insufficient Compensation,” International Federation for Human Rights and Bangladesh Odhikar, April 24, 2014, http://www.fidh.org/en/globalisation-human-rights/15179-one-year-after-….
4 Sarah Butler, “Bangladesh factory owners threaten inspection agencies with legal action,” the Guardian, May 26, 2014, http://www.theguardian.com/world/2014/may/26/bangladesh-clothing-factory-safety-agreement-compensation-closures.
TISCH HALL 40 WEST FOURTH STREET, SUITE 400
NEW YORK, NY 10012-1118
STERN.NYU.EDU/BHR
SARAH LABOWITZ AND DOROTHÉE BAUMANN-PAULY
Center for Business and Human Rights
NYU Stern School of Business
In response to “‘Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza’: UNI Global Union and IndustriALL Respond”
June 3, 2014 We are pleased that our recent report, “Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza,” has attracted attention from the global labor movement. The report is the first major human rights report published by a business school, and is the result of a significant research effort on the part of the Center for Business and Human Rights at NYU Stern over the last year.
We appreciate UNI Global Union and IndustriALL’s endorsement of some of the key findings of our report, namely that there is a need for the to establish more direct and long-term sourcing relationships with factories; that the government of Bangladesh needs to assume greater responsibility for regulating the garment sector; and that there is a need to provide factories with economic incentives to comply with demands for better working conditions.
As we have said in the past and reiterated in the report, the Accord and the Alliance are two important initiatives aimed at improving fire and building safety. It is a very positive development that more than 170 American and European companies are now working together on issues of workplace safety and embracing common standards for implementation. Both agreements adopt common safety standards and include extensive factory inspection programs, as well as some training and capacity building for workers and management. We commend UNI Global Union and IndustriAll for their ongoing efforts both to negotiate the Accord and to press for successful implementation of that agreement. But even in light of these important efforts, more needs to be done.
The majority of our 64-page report focuses on the link between business practices, poor working conditions, and weak respect for workers’ rights in the garment sector in Bangladesh. We devote four pages of the report and a brief appendix to a discussion of the Accord and the Alliance.
UNI Global Union and IndustriALL’s response to the report focuses on our analysis and conclusions about the Accord and the Alliance, and our findings about the widespread, non-transparent practice of subcontracting as a driver of increased risk of poor working conditions and weak protections for labor rights in Bangladesh.
One of our key findings in the report is that indirect sourcing – the routine practice of subcontracting, often through purchasing agents and in a manner that is not transparent to buyers, in order to increase margins and boost production capacity while keeping costs low – is an essential though poorly understood feature of the garment sector in Bangladesh. Our report explains and clarifies this system and the risks it presents for workers. We also conclude that neither the Accord nor the Alliance is doing enough to address the consequences of this system, and that neither includes the full range of factories that are likely producing for t heir member brands, despite textual commitments to include subcontractors in both agreements.
In late April, we presented the report to a group of 75 participants in the garment sector in Dhaka, including buyers and suppliers. Representatives of brands and retailers, as well as factory owners, affirmed that indirect sourcing is an open secret in Bangladesh and remains the driving force behind Bangladesh’s low prices, high volumes, and poor working conditions. We are confident that our report accurately describes current business models and practices, and the associated risks to workers.
The UNI Global Union and IndustriALL response points out that the Accord’s disclosure protocol also applies to “unauthorized” subcontracting and that the Accord’s publicly accessible database of factories can be augmented if “workers, unions, independent researchers or journalists identify the brand’s production” at a factory not yet listed. B ut neither the Accord nor the Alliance is currently taking affirmative steps to systematically identify and assess the full universe of factories. As our report highlights, there are few incentives for first-tier suppliers to come forward with their actual list of subcontractors, or for workers or unions to identify their employers. The brands’ zero-tolerance policies for “unauthorized” subcontracting drive the practice further underground.
In our judgment, it is not sufficient to rely on individual workers or journalists to identify subcontractors or unregistered facilities sourcing for global brands in the Accord (or the Alliance) on an ad hoc basis. As we say in the report, what is needed is a concerted, collective approach between Accord and Alliance members and their first-tier suppliers to identify the full range of factories producing for the export market. The conversation about non-transparent subcontracting must be brought into the open.
The UNI Global Union and IndustriALL response to our report misconstrues our position on this issue in several ways. We have never claimed that direct suppliers are without problems. As the early audits make clear, there are a range of problems in these factories, many quite serious. We have never said, and do not believe, that these factories are “safe enough” or that they are “basically okay.” And we have never suggested that the Accord or the Alliance abandon inspections or remediation in the group of factories for which they have acknowledged responsibility.
We are however, very clear in our report that neither the Accord nor the Alliance goes far enough in taking responsibility for the thousands of second and third tier facilities that are producing garments indirectly for their members. We affirm our estimate – based on extensive review of the trade associations’ membership directories, the government’s new factory database, and numerous interviews – that there are between 5,000 and 6,000 factories and facilities involved in export garment production in Bangladesh, including facilities that are as yet unregistered with the trade associations or the government. We call on the government, the trade associations, and the ILO to rationalize the process for registering and accounting for the full range of factories in the export garment sector. And we encourage global brands and retailers, including member companies in the Accord and the Alliance, to take responsibility for the full extent of their supply chains.
We stand by our assessment that garment facilities that rely on subcontracted orders, operate on razor-thin margins, and are beyond the reach of meaningful oversight represent the most vulnerable in Bangladesh. The UNI Global Union and IndustriALL response to our report notes that major factory disasters have “occurred in factories that were recognized producers for major brands and had been repeatedly inspected by them.”
But at the time of the Rana Plaza and Tazreen disasters, it has been widely reported that many brands were not aware that their products were being manufactured in these facilities because they were being produced by unauthorized subcontractors that were not transparent to the brands. Reporting by the news media and civil society confirms that garment factories in the most high profile factory disasters did a mix of subcontracting and direct work, often through agents, with limited transparency and oversight.
To cite one example, the Wall Street Journal summarizes the role of indirect sourcing in one Rana Plaza factory, using Benetton as an example: “At first, [Benetton] denied having any relationship at all with New Wave Style. That initial confusion exposes the complexities of a global supply chain in which retailers assemble sprawling networks of contractors and middlemen…The tangled n etworks also make it difficult to assess blame when something goes wrong.”
Tazreen and Rana Plaza are stark illustrations of the consequences of a system in which brands maintain a sincere or willful ignorance of where their garments are produced. The fact that these facilities had been subject to audits at some point in time does not answer or refute our report’s overall finding about the prevalence and risks of non-transparent subcontracting. The financial and production incentives that drive manufacturing for major brands into unknown facilities are very powerful. We squarely criticize this lack of transparency in the report and make recommendations for strengthening sourcing relationships and increasing oversight at all levels of the supply chain.
We are very concerned about the workers in facilities that are virtually invisible to brands and regulators. We encourage brands, first-tier suppliers, unions and labor groups, governments, and international organizations to take seriously the risks presented by non-transparent subcontracting. The assertion that the Accord has adequate systems in place to capture all but a small number of non-transparent subcontractors is not born out in reality.
The UNI Global Union and IndustriALL response includes a lengthy textual analysis of the Accord and its negotiating history. We appreciate that the Accord was a difficult document to negotiate. We, along with many others, have high expectations for its implementation. But our analysis of the Accord, as well as the Alliance, focuses on their practical implementation, which reveals significant shortcomings.
There are several important issues on which we disagree with the assessment of the current situation and the characterization of our position in the UNI Global Union and IndustriALL response to our report. Perhaps the most important is on the question of who will pay for factory repairs and other remediation. The response asserts that the Accord has clear language on this matter and that, “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 share their view that the brands should bear significant responsibility for financing these costs, the language of the Accord is not clear. Article 22 of the Accord calls for a resolution based on “negotiated commercial terms.” Based on our own recent conversations in Dhaka with representatives of brands and manufacturers in both the Accord and Alliance, the question of who will pay for repairs, safety upgrades, and other remediation efforts under these negotiated terms is far from resolved. And we are not aware of a single brand that is part of the Accord or the Alliance that has made a public statement affirming the conclusion that brands bear the majority of the responsibility for financing remediation. This gives us cause for concern. Given the asymmetrical relationship between the brands and local manufacturers, many local manufacturers fear (not unreasonably) that as Accord and Alliance inspections reveal serious structural and safety flaws, the overwhelming burden to pay for repairs or rebuilding will fall on them. Because the agreement leaves the source of funding of repairs to a negotiation between individual buyers and suppliers, we share the concern of many suppliers who fear that their global buyers will say to them, “fix the problems or we will take our business elsewhere.”
The UNI Global Union and IndustriALL response mischaracterizes our position on this issue in several ways. It is not our position that the Accord will “not make a difference.” We have never said that brands should do nothing and “wait for the government of Bangladesh to step up and do its job.” And we do not believe that the “Accord creates no obligation for s ignatory brands to assist factory owners with the cost of safety renovations.”
Our report does bring to light the difficult questions raised by ambiguities and gaps in the Accord, as well as the Alliance. We feel it is important to raise these issues now, and to press for a more predictable, transparent system with sufficient oversight to ensure that global brands pay their fair share, factories are actually remediated, and Bangladesh remains a competitive sourcing destination.
As the response notes, we favor the creation of a pooled fund for factory remediation with contributions from all global brands and retailers sourcing from Bangladesh, as well as foreign governments and international financial institutions. It is inefficient and unwise for there to be two separate entities addressing the same challenges. The current model for remediation in both the Accord and Alliance is creating significant confusion and anxiety on the ground. We think the Accord and the Alliance can do better, and that a pooled fund is both possible and necessary in order to achieve a safer garment sector in Bangladesh.
However, the response to our report misrepresents our conclusions about who is responsible for funding badly needed infrastructure improvements in Bangladesh. We write, “The effort to build a functional infrastructure will require still greater resources. It is unfathomable that the government of Bangladesh and the private sector can do this alone.” We call on foreign governments and international financial institutions to fund infrastructure development to address electrical shortages, transport limitations, and a lack of purpose-built industrial infrastructure which are major contributing causes to poor factory safety. As we make clear in the report, brands and retailers have a vital role to play in funding upgrades in factory safety. But it is not the brands’ responsibility to pay for power plants, roads, and new industrial complexes.
Our report examines human rights challenges in the garment sector in Bangladesh from a business perspective. Our objective is to analyze the current reality and push for further significant changes in the way business operates in the manufacturing supply chain in order to enhance workplace safety and workers’ rights. Some of these changes will undoubtedly take time. We look forward to working with UNI Global Union and IndustriALL, as well as other global and local unions, to advance our shared goal of a safer, rights-respecting, and competitive garment sector in Bangladesh.
Sincerely,
Sarah Labowitz
Co-director and Research Scholar
Center for Business and Human Rights
NYU Stern School of Business
Dorothée Baumann-Pauly
Research Director
Center for Business and Human Rights
NYU Stern School of Business
1 Available as a PDF file
2 Syed Zain Al-Mahmood, Christina Passariello, Preetika Rana, “The Global Garment Trail: From Bangladesh to a Mall Near You,” Wall Street Journal, May 3, 2013,
NEW YORK, NY 10012-1118
STERN.NYU.EDU/BHR
SARAH LABOWITZ AND DOROTHÉE BAUMANN-PAULY
Center for Business and Human Rights
NYU Stern School of Business
In response to “‘Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza’: UNI Global Union and IndustriALL Respond”
June 3, 2014 We are pleased that our recent report, “Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza,” has attracted attention from the global labor movement. The report is the first major human rights report published by a business school, and is the result of a significant research effort on the part of the Center for Business and Human Rights at NYU Stern over the last year.
We appreciate UNI Global Union and IndustriALL’s endorsement of some of the key findings of our report, namely that there is a need for the to establish more direct and long-term sourcing relationships with factories; that the government of Bangladesh needs to assume greater responsibility for regulating the garment sector; and that there is a need to provide factories with economic incentives to comply with demands for better working conditions.
As we have said in the past and reiterated in the report, the Accord and the Alliance are two important initiatives aimed at improving fire and building safety. It is a very positive development that more than 170 American and European companies are now working together on issues of workplace safety and embracing common standards for implementation. Both agreements adopt common safety standards and include extensive factory inspection programs, as well as some training and capacity building for workers and management. We commend UNI Global Union and IndustriAll for their ongoing efforts both to negotiate the Accord and to press for successful implementation of that agreement. But even in light of these important efforts, more needs to be done.
The majority of our 64-page report focuses on the link between business practices, poor working conditions, and weak respect for workers’ rights in the garment sector in Bangladesh. We devote four pages of the report and a brief appendix to a discussion of the Accord and the Alliance.
UNI Global Union and IndustriALL’s response to the report focuses on our analysis and conclusions about the Accord and the Alliance, and our findings about the widespread, non-transparent practice of subcontracting as a driver of increased risk of poor working conditions and weak protections for labor rights in Bangladesh.
One of our key findings in the report is that indirect sourcing – the routine practice of subcontracting, often through purchasing agents and in a manner that is not transparent to buyers, in order to increase margins and boost production capacity while keeping costs low – is an essential though poorly understood feature of the garment sector in Bangladesh. Our report explains and clarifies this system and the risks it presents for workers. We also conclude that neither the Accord nor the Alliance is doing enough to address the consequences of this system, and that neither includes the full range of factories that are likely producing for t heir member brands, despite textual commitments to include subcontractors in both agreements.
In late April, we presented the report to a group of 75 participants in the garment sector in Dhaka, including buyers and suppliers. Representatives of brands and retailers, as well as factory owners, affirmed that indirect sourcing is an open secret in Bangladesh and remains the driving force behind Bangladesh’s low prices, high volumes, and poor working conditions. We are confident that our report accurately describes current business models and practices, and the associated risks to workers.
The UNI Global Union and IndustriALL response points out that the Accord’s disclosure protocol also applies to “unauthorized” subcontracting and that the Accord’s publicly accessible database of factories can be augmented if “workers, unions, independent researchers or journalists identify the brand’s production” at a factory not yet listed. B ut neither the Accord nor the Alliance is currently taking affirmative steps to systematically identify and assess the full universe of factories. As our report highlights, there are few incentives for first-tier suppliers to come forward with their actual list of subcontractors, or for workers or unions to identify their employers. The brands’ zero-tolerance policies for “unauthorized” subcontracting drive the practice further underground.
In our judgment, it is not sufficient to rely on individual workers or journalists to identify subcontractors or unregistered facilities sourcing for global brands in the Accord (or the Alliance) on an ad hoc basis. As we say in the report, what is needed is a concerted, collective approach between Accord and Alliance members and their first-tier suppliers to identify the full range of factories producing for the export market. The conversation about non-transparent subcontracting must be brought into the open.
The UNI Global Union and IndustriALL response to our report misconstrues our position on this issue in several ways. We have never claimed that direct suppliers are without problems. As the early audits make clear, there are a range of problems in these factories, many quite serious. We have never said, and do not believe, that these factories are “safe enough” or that they are “basically okay.” And we have never suggested that the Accord or the Alliance abandon inspections or remediation in the group of factories for which they have acknowledged responsibility.
We are however, very clear in our report that neither the Accord nor the Alliance goes far enough in taking responsibility for the thousands of second and third tier facilities that are producing garments indirectly for their members. We affirm our estimate – based on extensive review of the trade associations’ membership directories, the government’s new factory database, and numerous interviews – that there are between 5,000 and 6,000 factories and facilities involved in export garment production in Bangladesh, including facilities that are as yet unregistered with the trade associations or the government. We call on the government, the trade associations, and the ILO to rationalize the process for registering and accounting for the full range of factories in the export garment sector. And we encourage global brands and retailers, including member companies in the Accord and the Alliance, to take responsibility for the full extent of their supply chains.
We stand by our assessment that garment facilities that rely on subcontracted orders, operate on razor-thin margins, and are beyond the reach of meaningful oversight represent the most vulnerable in Bangladesh. The UNI Global Union and IndustriALL response to our report notes that major factory disasters have “occurred in factories that were recognized producers for major brands and had been repeatedly inspected by them.”
But at the time of the Rana Plaza and Tazreen disasters, it has been widely reported that many brands were not aware that their products were being manufactured in these facilities because they were being produced by unauthorized subcontractors that were not transparent to the brands. Reporting by the news media and civil society confirms that garment factories in the most high profile factory disasters did a mix of subcontracting and direct work, often through agents, with limited transparency and oversight.
To cite one example, the Wall Street Journal summarizes the role of indirect sourcing in one Rana Plaza factory, using Benetton as an example: “At first, [Benetton] denied having any relationship at all with New Wave Style. That initial confusion exposes the complexities of a global supply chain in which retailers assemble sprawling networks of contractors and middlemen…The tangled n etworks also make it difficult to assess blame when something goes wrong.”
Tazreen and Rana Plaza are stark illustrations of the consequences of a system in which brands maintain a sincere or willful ignorance of where their garments are produced. The fact that these facilities had been subject to audits at some point in time does not answer or refute our report’s overall finding about the prevalence and risks of non-transparent subcontracting. The financial and production incentives that drive manufacturing for major brands into unknown facilities are very powerful. We squarely criticize this lack of transparency in the report and make recommendations for strengthening sourcing relationships and increasing oversight at all levels of the supply chain.
We are very concerned about the workers in facilities that are virtually invisible to brands and regulators. We encourage brands, first-tier suppliers, unions and labor groups, governments, and international organizations to take seriously the risks presented by non-transparent subcontracting. The assertion that the Accord has adequate systems in place to capture all but a small number of non-transparent subcontractors is not born out in reality.
The UNI Global Union and IndustriALL response includes a lengthy textual analysis of the Accord and its negotiating history. We appreciate that the Accord was a difficult document to negotiate. We, along with many others, have high expectations for its implementation. But our analysis of the Accord, as well as the Alliance, focuses on their practical implementation, which reveals significant shortcomings.
There are several important issues on which we disagree with the assessment of the current situation and the characterization of our position in the UNI Global Union and IndustriALL response to our report. Perhaps the most important is on the question of who will pay for factory repairs and other remediation. The response asserts that the Accord has clear language on this matter and that, “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 share their view that the brands should bear significant responsibility for financing these costs, the language of the Accord is not clear. Article 22 of the Accord calls for a resolution based on “negotiated commercial terms.” Based on our own recent conversations in Dhaka with representatives of brands and manufacturers in both the Accord and Alliance, the question of who will pay for repairs, safety upgrades, and other remediation efforts under these negotiated terms is far from resolved. And we are not aware of a single brand that is part of the Accord or the Alliance that has made a public statement affirming the conclusion that brands bear the majority of the responsibility for financing remediation. This gives us cause for concern. Given the asymmetrical relationship between the brands and local manufacturers, many local manufacturers fear (not unreasonably) that as Accord and Alliance inspections reveal serious structural and safety flaws, the overwhelming burden to pay for repairs or rebuilding will fall on them. Because the agreement leaves the source of funding of repairs to a negotiation between individual buyers and suppliers, we share the concern of many suppliers who fear that their global buyers will say to them, “fix the problems or we will take our business elsewhere.”
The UNI Global Union and IndustriALL response mischaracterizes our position on this issue in several ways. It is not our position that the Accord will “not make a difference.” We have never said that brands should do nothing and “wait for the government of Bangladesh to step up and do its job.” And we do not believe that the “Accord creates no obligation for s ignatory brands to assist factory owners with the cost of safety renovations.”
Our report does bring to light the difficult questions raised by ambiguities and gaps in the Accord, as well as the Alliance. We feel it is important to raise these issues now, and to press for a more predictable, transparent system with sufficient oversight to ensure that global brands pay their fair share, factories are actually remediated, and Bangladesh remains a competitive sourcing destination.
As the response notes, we favor the creation of a pooled fund for factory remediation with contributions from all global brands and retailers sourcing from Bangladesh, as well as foreign governments and international financial institutions. It is inefficient and unwise for there to be two separate entities addressing the same challenges. The current model for remediation in both the Accord and Alliance is creating significant confusion and anxiety on the ground. We think the Accord and the Alliance can do better, and that a pooled fund is both possible and necessary in order to achieve a safer garment sector in Bangladesh.
However, the response to our report misrepresents our conclusions about who is responsible for funding badly needed infrastructure improvements in Bangladesh. We write, “The effort to build a functional infrastructure will require still greater resources. It is unfathomable that the government of Bangladesh and the private sector can do this alone.” We call on foreign governments and international financial institutions to fund infrastructure development to address electrical shortages, transport limitations, and a lack of purpose-built industrial infrastructure which are major contributing causes to poor factory safety. As we make clear in the report, brands and retailers have a vital role to play in funding upgrades in factory safety. But it is not the brands’ responsibility to pay for power plants, roads, and new industrial complexes.
Our report examines human rights challenges in the garment sector in Bangladesh from a business perspective. Our objective is to analyze the current reality and push for further significant changes in the way business operates in the manufacturing supply chain in order to enhance workplace safety and workers’ rights. Some of these changes will undoubtedly take time. We look forward to working with UNI Global Union and IndustriALL, as well as other global and local unions, to advance our shared goal of a safer, rights-respecting, and competitive garment sector in Bangladesh.
Sincerely,
Sarah Labowitz
Co-director and Research Scholar
Center for Business and Human Rights
NYU Stern School of Business
Dorothée Baumann-Pauly
Research Director
Center for Business and Human Rights
NYU Stern School of Business
1 Available as a PDF file
2 Syed Zain Al-Mahmood, Christina Passariello, Preetika Rana, “The Global Garment Trail: From Bangladesh to a Mall Near You,” Wall Street Journal, May 3, 2013,
“Business as Usual is Not an Option: Supply Chains and Sourcing after Rana Plaza”
UNI Global Union and IndustriALL Respond
26th May 2014
Introduction
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 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 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 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)
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)
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 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.
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.
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 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.
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.
UNIVERSITY OF CALIFORNIA, SANTA BARBARA GLOBAL & INTERNATIONAL STUDIES PROGRAM SANTA BARBARA, CALIFORNIA 93106-7065 PHONE: (805) 893-7860 FAX: (805) 893-8003
May 22, 2014
Professor Michael Posner, Co-Director
Center for Business and Human Rights
New York University Stern School of Business
44 West Fourth Street New York, NY 10012
Dear Professor Posner,
Last month, the Center for Business and Human Rights at the NYU Stern School of Business released a report on the garment industry in Bangladesh, its relationship to the supply chain practices of major apparel brands, and two high-profile initiatives underway to address the industry’s worker safety crisis – the Accord on Fire and Building Safety in Bangladesh and the Alliance for Bangladesh Worker Safety. Yet, surprisingly, the report’s authors focus their criticism of business practices in Bangladesh’s apparel industry not primarily on Western brands, but instead on the local factory owners and buying agents who are these companies’ suppliers, and, moreover, elide the critical differences in the commitments contained in the Accord and the Alliance. As faculty in the field of labor and human rights, we, the undersigned, offer our perspective on the analysis and prescriptions in this report.
Strangely, the report’s authors assert that the main cause of labor rights violations in Bangladesh is local factories surreptitiously subcontracting the orders they receive from brands and they criticize the Accord and Alliance for not covering subcontract factories. The authors claim that subcontract factories are more dangerous than those producing directly for brands, in part because they fall outside the scope of inspection regimes operated by the government and buyers.
This claim, however, is utterly at odds with the facts. All of the major disasters that have occurred in the region’s garment factories in recent years occurred at facilities that were known by major brands to have produced their goods and had been repeatedly subjected to labor rights audits conducted for these same buyers. This list of tragedies includes the fires at Tazreen Fashions (audited for Walmart and others), That’s It Sportswear (audited for Gap, VF Corporation, Kohl’s, etc.), Garib & Garib (audited for H&M), as well as the Ali Enterprises factory in Pakistan, site of the worst fire in the history of apparel production (audited for the German retailer, KiK). The list also includes the building collapse at Rana Plaza (whose factories were audited for Children’s Place, Loblaw and others), the worst industrial disaster in the history of manufacturing.
As this chain of tragedy shows, the main problem claiming workers’ lives in Bangladesh is not subcontract factories ‘flying under the radar.’ Virtually every apparel factory in Bangladesh 2
lacks fire doors and other rudimentary safety mechanisms. The problem is the systematic failure of both the Bangladesh’s government and international brands to effectively police the nation’s garment factories, across the board.
Moreover, the claim that the Accord does not cover subcontract factories is entirely incorrect, as a plain reading of the agreement establishing the Accord makes clear. That agreement’s requirements apply to any factory that produces the goods of any signatory brand – regardless of the number of layers of subcontracting involved.
The authors’ analysis of the two most visible safety initiatives currently underway, the Accord and the Alliance, is similarly lacking in rigor. Specifically, not only do the authors take an unjustifiably pessimistic view of the Accord’s likely impact, but they downplay the significance of the vital differences between it and the Alliance. The result is a false equivalence, from the perspective of ethical business practice, between the very significant and enforceable commitments made by companies that have joined the Accord (including, as we discuss below, a first-ever commitment to provide needed financial assistance to third-party suppliers for safety improvements at their factories) and the much less significant, and effectively unenforceable, promises made by the firms that refused to join the Accord, and, instead, formed the Alliance.
As instances of the report’s failure to acknowledge key differences between the Accord and the Alliance are too many to discuss here, we will only note some of the most glaring examples. First, the authors attribute little significance to the fact that the Accord, unlike the Alliance, includes worker representatives (unions) as counterparties to the signatory brands, equating this with the fact that the Alliance, unlike the Accord, includes factory owners in its governance structure. This overlooks the seemingly obvious point that having worker representatives as parties to a factory safety agreement will tend to promote its rigorous enforcement, while having the factory owners involved in the governance of such a regime will tend to have the opposite effect. Failing to acknowledge that the absence of worker representatives as signatories to the Alliance agreement means leaving brands – and their chosen appointees – responsible for enforcing the agreement against other brands is indicative of the report’s flawed analysis.
Second, the authors appear to view the Accord and the Alliance as equivalent in their legal enforceability, despite the fact that the Alliance’s founding companies explicitly justified their decision to create that initiative, rather than join the Accord, based on their wish to avoid risks of greater legal liability under the latter (and that the Alliance’s own Managing Director has referred to the Alliance as a "gentlemen’s agreement," in contrast to an enforceable contract). Even a cursory reading of the Alliance agreement reveals that these brands achieved their objective. Not only is enforcement of the requirements left exclusively to signatory companies and their appointees, but the maximum penalty that even could be applied to a company that fails to fulfill its obligations is to have to leave the program and forfeit modest membership fees it already agreed to pay – hardly a serious deterrent for a firm that has already decided to breach its commitments. By contrast, the Accord is enforceable, by its signatory unions, via the standard mechanism for resolving disputes under commercial contracts: binding neutral arbitration by an adjudicator empowered to issue whatever remedies are needed to address the breach.
Third, the authors deny there is any meaningful distinction between the Accord and the Alliance on the issue of financial support to factories for renovation costs. They attribute no significance to the fact the Alliance only features a voluntary loan program for supplier factories in which 3
signatory companies are not required to participate, while the Accord includes a clear mandate for signatory companies to provide needed financial assistance to factories for the cost of repairs (See Accord § 22: "[P]articipating 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."). The authors could have made a reasonable argument that this obligation may in some cases take hard work to enforce – since brands have never previously accepted such a burden – but to deny that the obligation exists is to ignore the plain text of the agreement.
The authors’ unwillingness to consider the assistance that the Accord brands are required to provide factories when needed to meet renovation costs – and the absence of a similar requirement under the Alliance – as a signal difference is striking, particularly given their stated concern that factory owners will forgo renovations for lack of funds. Yet if factories’ lack of financial resources is a key obstacle, then why isn’t financial assistance for factories that need it, which is an obligation under the Accord, a crucial advantage? And, conversely, why isn’t the absence of any requirement to provide such assistance under the Alliance a critical flaw?
In conclusion, the report’s analysis of the causes of the country’s factory safety crisis and its evaluation of the initiatives underway in response is flawed and misleading. It obscures the central role of brand practices in creating the crisis, makes claims about relative safety levels at different categories of factories that are demonstrably false, and blurs the profound differences between the Alliance – another unilateral and, for all practical purposes, voluntary corporate scheme – and the Accord, a groundbreaking labor-management contract that legally obligates brands, for the first time, to take financial responsibility for ensuring improved working conditions in their overseas contract factories. By failing to acknowledge the stark differences in the nature of these two commitments, this report squanders an important opportunity to shed light on what is being done by some brands, and not being done by others, to avert the next Rana Plaza.
Sincerely yours,
Richard P. Appelbaum MacArthur Chair in Sociology and Global & International Studies University of California at Santa Barbara
|