WASHINGTON — The two consortiums seeking to bolster safety in Bangladesh apparel factories have joined forces with the International Finance Corporation to help provide $50 million in long-term financing to the Asian nation’s industry.
The initiative was unveiled a day after several other organizations, including the Clean Clothes Campaign, demanded a change in approach to factory inspections in Bangladesh.
The IFC, a member of the World Bank Group, will provide the $50 million in financing — $10 million each to five Bangladeshi banks — which will in turn be able to provide much needed low-cost financing to garment factory owners trying to bring their factories up to standard and ensure safe working conditions for millions of workers. The new financing comes at a pivotal time for the two industry initiatives, which are about halfway into a five – year commitment to improve building, fire and electrical safety in hundreds of factories that produce clothing for brands and retailers. Remediation of the factories and training is a massive undertaking.
The Alliance for Bangladesh Worker Safety has 26 member companies, including Wal-Mart Stores Inc., Gap Inc., VF Corp. and Target Corp., while the Accord on Fire and Building Safety in Bangladesh has some 200 member firms, including H&M, Marks & Spencer, Carrefour, Primark and C&A. Both groups were established following the two factory tragedies in Bangladesh.
The Alliance and Accord have also each donated about $250,000 each to fund the operation, she said.
“I, like many of you, was haunted by the image of the tragedies at the Tazreen Fashions factory in November 2012 and then again by the Rana Plaza collapse in April 2013, which together took more 1,200 lives — children lost their parents, husbands lost their wives and families lost their loved ones,” said World Bank group president Jim Yong Kim, who spoke during the launch of the new program here. “The international community was both horrified and outraged. Still today, unfortunately, many labor in unsafe conditions, trying to work their way out of poverty to support their families. Despite a strong desire to improve worker safety from the government and buyers in the garment industry, many factories have found it difficult to access the capital necessary to make the improvements that meet buyer standards.”
Kim called the new financing program a “major step forward” in addressing the major challenges confronting the Bangladesh garment industry, which employs some four million people in an estimated 4,500 factories.
Ellen Tauscher, independent chair of the Alliance, said through the group’s work “inspecting, evaluating and reporting on the structural, electrical and fire safety of…factories in Bangladesh, it became clear that access to affordable and long-term financing was not a viable option for many factory owners.”
“The Alliance determined that it was necessary to find a way to provide affordable and long-term financing to factory owners so that they could immediately initiate critical reports to make…factories safe,” she said. “There are few viable financing options in Bangladesh and interest rates are prohibitively high. This facility will offer factory owners lower interest rates and longer payback periods, dramatically lowering the risk of borrowing money.”
Melanie Steiner, chief risk officer of PVH Corp., who is on the steering committee of the Accord, said: “This agreement is really a watershed moment for the Accord and will no doubt facilitate our work in making Bangladesh’s garment industry safe for the millions of women and men who work at the local factories. The financing made available by IFC and participating banks will allow for lifesaving fire, electrical and structural remedy work that needs to be completed in Bangladesh.”
The Alliance’s member companies use about 800 factories in Bangladesh, while the Accord’s members use about 1,500 factories.
Tauscher said in an interview that the new credit facility is targeting the middle to lower tiers in the group of about 2,300 factories, although the long-term goal is to provide financing to any factory that needs it. The average cost of remediation runs in the range of $250,000 to $350,000, she said, noting that the new $50 million facility is the first tranche of what she hopes will be more affordable financing. She also noted that member companies, such as VF Corp. have helped their factories secure low-interest financing.
Even as the Accord and Alliance revealed their financing plans, the European Center for Constitutional and Human Rights, The African Women’s Development and Communication Network, also known as FEMNET, and the Clean Clothes Campaign, Medico International and the Activist Anthropologist Collective from Bangladesh submitted a joint complaint to the Business Social Compliance Initiative on Monday. The complaint referred back to a BSCI-approved factory inspection that had submitted a report on a factory in Rana Plaza, the eight-story building that collapsed in Bangladesh in April 2013.
The collapse of the building was one of the worst industrial accidents in the industry, taking the lives of more than 1,100 workers and injuring more than 2,000 others.
The joint complaint brought into sharp focus the role of inspectors, their mandate, and whether organizations are going about certification just to look good rather than ensure safety and quality assurance at factories.
The organizations called on the BSCI to disclose the audit contract as well as the reports on Rana Plaza by TÜV Rheinland Group — the company that inspected Phantom Apparel Ltd., one of the five companies that was located in Rana Plaza.
“The audit was done in June 2012 — that was 10 months before the collapse,” Dr. Carolijn Terwindt, legal adviser of Business and Human Rights, ECCHR, told WWD. “We want both BSCI and TÜV Rheinland to accept responsibility for their involvement for the auditing of the factories in Rana Plaza.”
Terwindt alleged the inspection was undertaken negligently, adding that “if it is found to be so, that BSCI should take action; for example, suspend the inspection company from the 19 that are listed on its Web site.”
The matter has been taken up after the organization received confidential access to the report last year, she said.
“This auditing scheme that they have constructed and that they oversee should be done in such a way that a system holder such as BSCI should ensure accountability whenever any of the auditing companies appear to have done a negligent audit,” she remarked.
BSCI, which is based in Brussels and is funded by European garment buyers, appears to be giving the issue due consideration.
“We are taking this matter very seriously,” Stephanie Luong, head of communications of the Foreign Trade Association, the association that created BSCI in 2003, told WWD. “For this reason we need some time to go through the document in order to be in a position to provide a comprehensive response that addresses their requests.”
She said that the document that was received Monday afternoon was presently in the process of being reviewed.
“The Business Social Compliance Initiative is committed to working in partnership to achieve sustainable labor improvements in Bangladesh and considers the engagement with stakeholders, such as the organizations signing this complaint, of importance,” she said.
BSCI reportedly audited two of the five garment factories at Rana Plaza, including New Wave Style and Phantom Apparel. The others in the building were Phantom Tac Ltd., Ether Tex and New Wave Bottoms.
As factory inspections have stepped up dramatically in Bangladesh, the question of their viability has become more important.
Over the last two years, more than 2,500 of the 4,000 garment factories in Bangladesh have been inspected.
“When disasters happen in the textile industry, producers, buyers and traders like to hide behind certificates of safety and working standards to dodge responsibility,” said Gisela Burckhardt, chairperson of FEMNET, a member of the Clean Clothes Campaign. “TÜV Rheinland did not adequately inspect the documentation of the building safety nor the worker’s records at Phantom Apparel Ltd. in Rana Plaza. This is shown by the investigative reports on the collapse as well as by victim statements.”
The criticism is that various inspections – including those of BSCI – have often relied too heavily on the involvement of the companies themselves, rather than working more closely with workers and trade unions. “In general, if an audit is conducted negligently then there should be liability,” Terwindt.
She pointed out that there were multiple issues at Rana Plaza that could have been noted even though the audit was done 10 months before the collapse of the building, for example, that extra floors were being constructed, the conversion of a commercial building to an industrial one, issues about load management and heavy generators being kept on the top floor. “These risks were not noticed even though they were similar to those in other collapses, for example, the Spectrum collapse,” she said, adding that neither the Foreign Trade Association nor TÜV Rheinland have contributed to the Rana Plaza Donors Trust Fund.
The key issue, she said, in the collapse of Rana Plaza, as well as in the fallout after the Ali factory fire in Karachi, Pakistan, in September 2012 in which more than 260 workers died, is that the compensation and help to workers have all been phrased as “charity” and “voluntary contributions” and not a consequence of the legal responsibility of these companies to their workers.