April 24, 2014

rana plaza

Image: Bangladesh Center for Workers Solidarity and the Solidarity Center

Today marks the one-year anniversary of the Rana Plaza factory collapse which killed over a 1,100 workers on the 24th April 2013. Looking back over the course of a year it is clear that the disaster has been the prompt for a great deal of soul searching and the catalyst for the launch of a variety of initiatives aimed at improving health and safety issues in the Bangladesh fashion industry. Despite this, many of the initiatives set up in the wake of the collapse have argued over approach, struggled with challenges in implementation and it is clear that there is a long way to go. More broadly, there are significant questions being asked about the sustainability of the current model of global apparel production. It remains to be seen whether the Rana Plaza disaster will lead to a better industry.

On the immediate concerns of building and fire safety three separate schemes have emerged the Bangladesh Accord on Fire and Building Safety, the Alliance for Bangladesh Worker Safety and the National Tripartite Plan of Action on Fire Safety in the RMG Sector.

The Bangladesh Accord on Fire and Building Safety is a legally binding agreement signed by businesses, NGOs and trade unions to conduct independent inspections and publicly report findings. It has been signed by 150+ companies including H&M, Inditex, Primark, PVH and Tesco. The Accord has hired 110 engineers to inspect factories and has conducted around 300 inspections. Eight factories have been shut down on the basis of unsafe conditions. The Alliance is backed by the mainly US brands: Walmart, Target, Macy’s and Gap and has no union signatories. Like the Accord, the Alliance has started to inspect factories. The key difference between the Accord and the Alliance revolves around who is liable for repair costs—the Accord is bearing this burden whilst the Alliance is asking factories to invest in improvements.

A report entitled “Business as Usual is Not an Option” published by Center for Business and Human Rights at New York University Stern School of Business this week, argues that the widespread use of indirect sourcing through agents and undisclosed outsourcing means that there is very little transparency over where clothing is actually being manufactured in Bangladesh.

Whilst the Accord and the Alliance can monitor and improve the safety and conditions in factories that are known by companies and brands, a large proportion of production for export will escape this scrutiny due to the opaque nature of indirect sourcing and undeclared outsourcing. The problems are that as production gets outsourced transparency decreases, responsibility gets diffuse and margin for improvement at the actual stage of production gets smaller as different actors take their cut. Whilst factories and agents engage in undeclared outsourcing there is no incentive for factories to improve conditions for workers, invest in productivity improvement programmes or equally fire and safety equipment and infrastructure.

Despite the three schemes it has been estimated that less than one quarter of the estimated 5000-6000 factories in Bangladesh have been inspected. Due to the prevalence of the indirect sourcing issue, it is widely understood that the worst of Bangladesh’s factories are likely to not yet have been audited or engaged. To tackle the poor conditions in the fashion industry, the nature of sourcing has to change, retailers and brands have to move to long term partnerships with known suppliers and tackle the problem of indirect sourcing. In the future there will be fewer but better managed factories in Bangladesh. An article in the Financial Times quotes Omar Chowdhury the manager of Syntex Knitwear “Those given the green signal by the Accord are like kings; buyers are lining up because they are scared of smaller guys,”

At the other end of the supply chain, consumer expectations and fast fashion is being questioned as part of Fashion Revolution day. The initiative is seeking to challenge consumer expectations of country of origin and has called for brands to disclose ‘who made my clothes’. The theme of transparency and who is making your clothing links to the analysis of Stern School of Business.

To create lasting and comprehensive transparency, brands will need to drill down into their supply chains, conduct a close examination of suppliers and seek to forge long-term relationships with suppliers.  To achieve this, brands will need to make significant resource commitments to engage in these studies for the long-term as uncovering these deeper layers of their supply chains is an iterative process.  Many brands have already reaped benefits of this engagement in terms of managing conditions, environmental impact, supply risk mitigation and also have identified great storytelling opportunities for further consumer and stakeholder engagement.

We hope that industry will continue to seek supply chain transparency and invest in ensuring sourcing regions meet social and environmental expectations of stakeholders worldwide.

Martin Buttle – Senior Supply Chain Consultant

Stefanie Maurice – Senior Consultant & Performance Services Manager

Tags: accord, bangladesh, collapse, rana plaza, supply chain, transparency.