ILRF Report Lambasts CSR Effectiveness

The 65-page report is expected to be made public today by the International Labor Rights Forum.

Bangladeshi Army personnel walk through rows of burnt sewing machines after a fire in the nine-story Tazreen Fashion plant.

WASHINGTON — Corporate Social Responsibility programs are a failure.

This story first appeared in the December 18, 2012 issue of WWD.  Subscribe Today.

That is the blunt conclusion reached in a 65-page report that is expected to be made public today by the International Labor Rights Forum. The report takes a comprehensive look at the prevalence of fires in Bangladesh’s garment industry that have killed more than 1,000 workers in the past two decades, despite the codes of conduct and CSR programs aspired to by apparel brands and retailers.

The demand for low prices and confidential audits of foreign apparel suppliers has led to a web of “dirty secrets,” preventable fires and tragic deaths in Bangladesh’s garment industry, according to the report, which comes in the wake of two of the most tragic fires in the history of the garment industry, killing a combined 375 garment workers in Bangladesh and Pakistan in the past three months, and forcing companies to rethink their CSR programs.

The report, titled “Dirty Secrets,” is a detailed accounting of the Bangladesh garment industry, the top export sector for the impoverished country, providing case studies of several fires in apparel factories that have led to the deaths of at least 1,071 workers and the injury of 3,127 in 279 incidents in unsafe factories since 1990, ILRF research shows. In most cases, the problems were the same — either locked or blocked fire exits or no proper escape routes at all — that trapped workers and prevented them from trying to flee the burning buildings.

“It has long been clear to labor rights advocates that corporate-controlled social auditing and certifications of codes of conduct fail to address and rectify the industry flaws that increase risk of factory fires, building collapses and other disasters,” the report said.

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The garment industry in Bangladesh has grown exponentially in the past 30 years, to $19.1 billion in apparel exports in 2011-2012 from $12,000 in 1978, the report stated, citing figures from the Bangladesh Garment Manufacturers & Exporters Association. Today, Bangladesh is the world’s second-largest exporter of apparel, boosted by orders from a wide range of U.S. and international brands and retailers, including Wal-Mart Stores Inc., H&M, Gap Inc., Kohl’s Corp., Li & Fung and Zara. The industry now accounts for 13 percent of Bangladesh’s gross domestic product and more than 78 percent of total exports, with 5,000 factories employing 3.6 million workers directly and 10 million workers indirectly.

Despite widespread unsafe workplaces, the garment industry in Bangladesh is poised to grow dramatically, primarily due to rising costs in China, according to a McKinsey & Co. survey of U.S. and European chief purchasing officers of apparel firms that represent 66 percent of total Bangladesh exports. The survey estimates that Bangladesh’s apparel exports will double by 2015 and nearly triple by 2020, and could directly employ some six million workers. One of the primary reasons for purchasing agents to move more production into Bangladesh is the command of low prices and wages, the survey said.

For an industry that size, there is a severely inadequate number of government inspectors, as revealed by the government’s own data. According to the Bangladesh Occupational Safety, Health & Environment Foundation, there are only 20 occupational health and safety inspectors for 50,000 registered factories. Each inspector is responsible for 2,500 factories.

The Bangladeshi government and Bangladesh Garment Manufacturers & Exporters Association have insisted that they have stepped up factory inspections and that fire safety has improved. In 2011, BGMEA reported that it visited 3,718 factories and, of those, 1,608 were brought under the fire-drill program.

Similarly, industry groups and certification programs such as the Worldwide Responsible Accredited Production certification program have been conducting fire-training courses in Bangladesh for the past couple of years. They argue they have prevented more fires from happening in the industry.

But the fires continue to spread and kill hundreds of garment workers a year. The ILRF places a large part of the responsibility and fault on apparel brands and retailers who demand low prices from factories and make it impossible to invest in better wages and improved safety conditions for workers. Many also refuse to release, on a regular basis with specific factory names and details, audit results to worker and labor rights groups, the report said.

“The knowledge they have about their present and past suppliers is kept private and confidential, creating a web of deadly secrets,” the report said. “Those secrets could eventually unravel the Bangladeshi garment industry. It is better to eliminate the need for secrets and create an industry founded on respect for workers. It is difficult to see how the ethical labor standards and low prices, both of which the companies desire, can coexist.”

The minimum wage rate in Bangladesh is set at $37 a month and is $24 less a month than the second cheapest rate paid to garment workers in Cambodia, according to the report.

Mike Duke, president and chief executive officer of Wal-Mart, said last week the prices it pays to contractors in Bangladesh are not the problem. Wal-Mart had to terminate its relationship with a supplier that subcontracted work to Tazreen Fashions Ltd. in Bangladesh, the site of the Nov. 24 blaze that killed 111 workers.

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On Monday, a Bangladesh government committee investigating the garment factory fire said the blaze was sabotage, probably by someone who worked there, according to news reports. But the panel said no matter who set the fire, the owner of the factory also should be punished for the deaths because he neglected worker safety.

“We will not buy from an unsafe factory,” Duke said. “So this is not a price discussion….If a factory is not going to operate with high standards, then we will not purchase from that factory and there’s no discussion about price.”

Duke also said Wal-Mart stopped doing business with 94 factories in Bangladesh in 2010 that failed to meet its compliance standards and helped raise the standards, in the area of fire safety in particular, in 23 other factories.

“Did anybody at Wal-Mart explain to the workers that company audits uncovered evidence of risks of fire?” the ILRF asked in the report. “Sharing those audit results with the workers appears to be a very cost-effective safety measure.”

ILRF has spearheaded a coalition of prominent labor and human rights groups that say the solution lies in more transparency and collaboration that gives workers more involvement in the safety of their workplaces. The coalition is pressing brands and retailers to sign onto the “Bangladesh Fire and Building Safety Agreement” that aims to implement an independent fire and building safety program in Bangladesh apparel factories. It would establish a two-year program to enact in-factory enforcement, develop a worker complaint process and mechanisms for workers to report health and safety risks, set up inspections by independent experts, implement public reporting of all inspections, establish a central role for unions and create a binding contract between the brands and worker representatives.

So far, only two companies — PVH Corp. and German retailer Tchibo — have signed it. The agreement will not take effect until at least two more major companies sign on.

“This is the Bangladesh bargain we want,” the report said. “And it can start with companies’ commitment to a new openness — sharing their knowledge about workplace hazards and respecting the voices of workers.”