Most professionals working in the garment industry will agree that routine violations of health and safety laws are the norm in the lowest GDP countries in Asia producing for America’s favorite brands.
The $20 billion dollar question is whether consumers are going to continue to reward American corporations for doing business in derelict factories where their “business partners” (to use Disney’s term) give their workers the kind of choices presented to the Rana Plaza workers that fateful day: “Go to work in a building that has been condemned and closed by the local police, or be penalized one month’s salary.” (It is interesting that a bank also located in Rana Plaza followed police orders and closed.)
What kinds of pressures are imposed on factories in Bangladesh that factory owners literally force their workers to risk death in order to get shipments delivered on time?
The pressure of Fast Fashion imposed by buyers for American companies is one of the causes.
Our favorite U.S. brands are engaged in a new business model called Fast Fashion that was first pioneered by Chinese factory owners operating outside of Florence, Italy 10 years ago. Using illegal trafficked workers from China who had been snuck into the country (they paid $13,000 to scary middlemen called snakeheads who guided them step by step overland from Central China). Chinese factory owners would accept an order from local Italian garment firms and not stop production until the order was completed. Most factories employed 50 workers or less, which meant there were no shift replacements. Workers put in 30+ hours at a time and people literally died at their sewing machines. Don’t ask what happened to their bodies, that discussion is for another day. But there’s a saying in Italy, “No one from China ever dies here.” Meaning if a Chinese worker dies in Italy, someone else immediately appears to take their identity papers and their name, and if they die, someone else appears, and so on.
In today's globalized economy what works well in one part of the world may catch on elsewhere, and fast fashion or pronto moda worked extremely well in Italy. In fact it succeeded to the point that experts credit it with saving the textile industry in Tuscany during the downturn in the 1990’s.
There you have the historical origin of the term fast fashion; and fast fashion is a big part of the problem in Bangladesh's apparel industry.
In the past ten years American brands happily adopted the FF model of quicker turnarounds, using digital technology to squeeze lead times from 9 months from order placement to production in Asia to store delivery in the U.S. to 90 days and less. Some retail firms now claim they can get goods ordered and on store shelves in five weeks.
H&M reports they now have 12 seasons a year and many other brands now have 8 seasons. This causes chaos at the factory level. One of the managers at a $30 billion American apparel company I interviewed for my Edmond J. Safra research said “ The buyers allow the factories to squeeze labor as a variable cost since they can’t adjust shipment schedules. This makes mandatory overtime violations much worse.”
A third party auditor for one of the European companies that has signed the recent Savar accord (to improve factories in Bangladesh) said, “They give their suppliers the OK to violate local overtime laws as long as the factory agrees to participate in an ”engagement process“. Nothing changes, which is exactly what they want — business as usual. I eventually became disgusted.”
The level of fast turnaround wreaks tremendous pressure on factories — who are fined by the Buyers if they ship even one day late. Yet Buyers claim the right to change designs and colors up to days before production begins with no allowances for later delivery, even when new materials have to be purchased to meet the change demands. The time pressure causes the factories to require overtime from workers to meet the deadlines. The overtime hours often go beyond the legal maximums for which workers are often not paid. The O/T wasn’t originally calculated in the cost of the goods, which are already at razor thin margins, and the Buyers refuse to pay a penny more.
The system of order chargebacks to already squeezed factories in the world’s lowest GDP countries also hinges on the unethical. American apparel buyers have already ferreted out the lowest cost suppliers in the world’s poorest nations, yet they insist on further discounts if shipment is a day late — for any reason. So this is another pressure on factory managers in Bangladesh who cannot afford to lose even an hour of production on the tight schedules imposed by foreign buyers.
The above scenarios give some idea of the time pressures imposed on Bangladesh factories scrambling to meet the demands of buyer-imposed fast fashion. But that isn’t the extent of the demands, because global brands now require world-class working conditions as well, at least on paper, to meet the expectations of consumers and stakeholders.
Against this backdrop we find the social auditing industry in Bangladesh, which is taking a lot of heat right now for this recent disaster, the earlier Tazreen fire and also the Ali Enterprises fire in Pakistan.
When factoring in fast fashion, does one really expect that safety measures and legal compliance are going to be a supplier’s priority, if they cause shipment delays?
Prior to the onset of fast fashion, Bangladesh’s record on labor standards was already near the bottom globally, which didn’t dissuade U.S. apparel firms from entering in record numbers.
However, the demands of the anti-sweatshop movement in the U.S. required that some attention be paid to Codes of Conduct and improving supplier standards. A newly emergent social audit sector, comprised mostly of for-profit firms, was happy to oblige and the sector has grown into a multi-million dollar industry, despite the UN’s John Rugge stating, “We keep hearing now, from just about everywhere... Monitoring doesn't work. ”Just about everyone, at least off the record, will tell you that monitoring doesn't work because people cheat.“
In Bangladesh the millions would have been better spent on exterior fire escapes.
A review of my archived social audit reports from Dhaka factories going back to 2007 reveals widespread conflicts of interest and corruption between auditors and factories. The big winners however are ultimately the U.S. brands, whose local profit margins far exceed those of local manufacturers or the commercial monitoring firms.
In Bangladesh, most NGO advocates will tell you that factory auditing generally leads to no interruption of the business model, no matter how many negative audit reports are generated or alarm bells sounded. That doesn’t mean that auditors don’t shake down factories for payments on a regular basis, threatening to issue a negative report if thousands are not paid to a designated third party not connected to the audit firm. (One of my reports states ”All transactions are done in cash and members of senior staff were seen carrying cash out in jute sacks.“ Think burlap bags filled with money. )
In general, sourcing guidelines gave plenty of leverage to factories and auditors to play with time for years. A U.S. $400 billion company’s ethical sourcing tool allowed factories with ”orange assessments“ to continue operating for two years up to receiving a fourth orange assessment, at which point order placement was to be stopped. But in reality, few brands will commit to working with any factory for a period as long as two years.
One of the reports states about the orange assessments, ”This gives the auditors an opportunity to negotiate with factories for kickbacks for the buyer’s orders to continue. Factories prefer to pay a smaller sum to the auditors rather than investing in improving labor standards. This practice is common because it deals with the disorder immediately and the factory is able to continue its normal operations/orders. In the process, compliance is no longer a priority.“
Continuing normal operations in every case trumped requiring minimal fire safety standards. Despite 6-8 stories being the average height of garment factories in Dhaka and its environs, there are almost no exterior fire escapes. Video footage of surrounding factories reveals that despite 15 years of scrutiny by American brands of their Bangladesh suppliers, not one six-story factory had an exterior fire escape. No factory should have passed any audits, or been given two years to make improvements when failing on this most basic life-preserving measure.
It remains to be seen whether this latest consortium being formed by American and European buyers will have an effect, while continuing both fast fashion business as usual and average wages to workers of less than 20 cents per hour.
This blog post originally appeared on the website of Harvard University's Edmond J. Safra Center for Ethics.