The Collateral Damage of Covid-19 in the Bangladesh Apparel Sector

 

By David Schilling, ICCR Senior Program Director

Tomorrow is the 7th anniversary of the Rana Plaza building collapse in Bangladesh where 1,138 garment workers were killed and over 2,500 injured.  This tragic, yet avoidable event and one of the worst workplace disasters in modern history exposed the human rights risks of outsourcing apparel manufacturing to factories with inadequate safeguards to protect workers.  A group of 250 investors, with $4.5 trillion in assets under management organized by the Interfaith Center on Corporate Responsibility, quickly mobilized to appeal to apparel brands and retailers to join the Accord on Fire and Building Safety1, a multi-stakeholder initiative which has helped to reform the sector and create safe factories through a binding agreement between global brands and trade unions.

Today, another unprecedented humanitarian crisis is unfolding in Bangladesh: The jobs of 4.1 million garment workers are being threatened as global brands cancel over $3 billion in orders due to the COVID-19 crisis. The coronavirus pandemic has led to worldwide store closures and now many apparel brands are refusing to accept completed garment orders, leading to factory closures.  A former garment worker I talked with this week told me, “The impact of workers losing their jobs and their health threatened by COVID-19 is many times worse than Rana Plaza, as bad as that was.”

A recent survey of 319 garment factory owners in Bangladesh conducted by Penn State University’s Center for Global Workers’ Rightsin late March revealed that when cancelling orders, over 72% of buyers refused to pay for raw materials (e.g. fabric) already purchased by their suppliers, and over 91% of buyers refused to pay suppliers’ production costs for goods they ordered. The report states: “As a result of order cancellations and lack of payment, 58% of factories surveyed report having to shut down most or all of their operations.”  

More than 2 million garment workers in Bangladesh have already been fired or furloughed as a result of COVID-19-related order cancellations and the failure of buyers to pay for these cancellations. The situation in Bangladesh is replicated in other countries like Cambodia, Vietnam and India, where apparel production is a major source of export revenue. Due to poverty wages, these workers typically have no savings they can fall back on. The Government of Bangladesh has announced an incentive package for paying salaries and allowances of export-oriented industry workers and employees. The test of its effectiveness will be measured by how many fired or furloughed workers receive funds.

At a minimum, investors are calling on companies to take the following actions on COVID-19 and to publicly disclose the steps they have taken:

  • Promptly pay suppliers for existing orders without renegotiating previously agreed pricing;
  • Don’t punish suppliers with payment reductions for delays due to COVID-19-related supply chain shortages (e.g., delayed raw material deliveries from China);
  • Where suppliers continue production, take steps to ensure that:
    • worker health and safety are prioritized (e.g. - provide hygienic working and living conditions, including measures for social distancing and protective gear, provide paid sick leave and strengthen communication on COVID-19 guidance in migrant workers’ languages);
    • overtime is on a voluntary basis and compensated at a premium rate;
  • Alternative sourcing or production does not occur in, from, or connected to, the Xinjiang Uyghur Autonomous Region (XUAR) due to China’s early recovery from COVID-19, as the XUAR continues to be tainted with human rights violations, including forced labor affecting the apparel sector.

We recognize that global apparel companies face painful, unprecedented challenges in their operations and we applaud the companies that have committed to pay their suppliers in full for existing orders and those in process, including adidas, H&M, Inditex, Marks & Spencer, Nike, PVH, Target (USA), UNIQLO and VF Corporation. More companies must step up to do the same. (Current information about company action is available on the Business & Human Rights  Resource Centre page and the Worker Rights Consortium (WRC) brand tracker.)

We welcome today’s announcement of the “COVID-19: Action In The Global Garment Industry”, statement signed by the International Trade Union Confederation, the International Organisation of Employers, IndustriALL Global Union, Bangladesh Employers’ Federation and major brands and retailers. It is a first step to mobilize funding from financial institutions and governments for manufacturers and workers to help mitigate the impact of the crisis, resources that are urgently needed.  

In the coming weeks, ICCR and KnowTheChain (KTC) will be coordinating investor letters and engagements with the 43 apparel/footwear companies ranked in the KTC’s 2018 Apparel and Footwear Benchmark Findings Report. We invite investors to join this initiative and add their voices to the call for responsible action to ameliorate the desperate situation of apparel workers across the globe. (Contact: dschilling@iccr.org, adorett@iccr.org)


 On 14 January 2020, representatives of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and the Steering Committee of the Accord on Fire and Building Safety in Bangladesh (Accord), signed an agreement to establish the RMG Sustainability Council (RSC) by June 1, 2020, which would include the Accords policies, protocols and staff but under a new governance structure made up of BGMEA representatives along with brands and trade unions. The date for its formation has been postponed because of impacts related to COVID-19.

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