NEW DELHI — It’s back to speculation and talk about money — even as a half dozen brands have signed up for the International Accord into Pakistan.
Will the 100 or so brands and retailers that source from Pakistan make these commitments as sales have been slow and a potential global recession looms?
The announcement last week that brands that are a part of the steering committee of the accord — including H&M, PVH Corp, Inditex, Bestseller, C&A and Otto Group — have signed on has added momentum to the announcement made on Dec. 15 that the accord would now be extended to Pakistan.
But the more than $100 million that has been spent over the last nine years implementing the accord in Bangladesh — which some analysts claim has sparked a highly successful safety movement for the country’s factories and workers — has already been an add-on to existing budgets, according to retailers, many of which also source from Pakistan.
The Accord on Fire and Building Safety in Bangladesh came together after the collapse of Rana Plaza in Dhaka, Bangladesh, in April 2013, where more than 1,133 workers lost their lives and hundreds were injured. More than 220 brands and retailers signed on, mostly European, in what was a binding agreement between global unions and the brands for a five-year period.
This was followed by a three-year transition accord, which was effectively banned by the Bangladesh Supreme Court in 2020. The new format that emerged was the RMG Sustainability Council in Dhaka, with an altered concept, in which the manufacturers were included in a tripartite agreement, with unions and brands. RSC came into being in 2020, and inherited the offices of the accord, as well as the global signatories. The payments are still being made in large part by the global brands and retailers in an 80:20 agreement, with local manufactures paying 20 percent. This is expected to change to 70:30 in the summer of 2023.
As these financial commitments continue, buyers question how much money there will be for the Pakistan Accord, as well as the required commitment by global brands and retailers in the face of the political and economic instability in the country of 220 million people. Hit by an energy crisis over the last year, with a shortfall of electricity and gas, low foreign reserves and inflation of more than 24 percent, the textile and apparel industry has little cash to spare for additional measures, according to industry analysts.
While it does help manufacturers to have the financial commitment from the brands and retailers, there remains a fair amount of investment — as in Bangladesh — in putting in sprinklers and fire doors, and in infrastructure and remediation.
While safety concerns came to the fore after the Ali factory fire in Karachi, Pakistan, in 2012, where more than 250 workers died, pressure for brands to put in measures to ensure their supply chain has been growing. German retailer Kik, which sourced from the company, committed more than $6 million for relief and compensation for the families of the victims in subsequent years. Kik was also ahead of the accord curve, unveiling an independent agreement with suppliers in December as Kik chief executive officer Patrick Zahn signed a memorandum of understanding with local stakeholders.
“For the brands it means that actually they are joining an initiative which bundles their forces,” said Jochen Juette-Overmeyer, brand representative and adviser. He is also a member of the accord steering committee. “And it is much more affordable to do it in a joint approach for brands joining the accord in regard to the obligations they have either from the law or because they want to adhere to the U.N. guiding principles. The common approach is not only more effective but also cost-sensitive than if they were to do it on their own,” he said, citing the fact that there were more than 200 brands in the initial accord and now 180 from around the world that signed up.
Juette-Overmeyer also observed that Pakistan had its own nuances and systems, which would require much more than financial commitments. “Pakistan has a different environment from Bangladesh. There are a lot of home textiles. There are also a lot of fabric mills, which is a problem of its own because in most cases they are not in direct relationship to a brand. That creates a difficult situation — how can you change the conditions of commercial actors where you only have an indirect business relationship? So it would require figuring out many different things for the brands that not only source in Pakistan but would also be willing to sign the Pakistan Accord, which is a part of the International Accord, and commit to be in Pakistan.”
Yet many retailers are positive about the need for the agreement.
“As one of the first signatories to the Bangladesh Accord in 2013, we welcome the expansion of the International Accord into Pakistan as we’ve seen the pivotal progress it has driven towards providing decent and safe workplaces in the sector,” U.K. retailer Primark told WWD in an email response. “We are now reviewing the details of the proposed agreement for Pakistan as part of our membership of the International Accord, in particular sharing any learnings we can bring from our dedicated Structural Integrity Program there, as well as the experience and expertise of our local team.”
The retailer has 22 approved supplier factories in Pakistan, and its own Structural Integrity Program is operational in Pakistan, Bangladesh, Cambodia and Myanmar, whereby Primark-approved factories are subject to comprehensive structural integrity surveys. Audits for these take place at least once a year to provide a detailed picture of working conditions across factories, including fire and electrical assessments.
“H&M Group are positive to continue contributing to strengthen the health and safety in the production countries where we are present. We have a long-term strategy with regards to manufacturing and sourcing,” an H&M spokesperson told WWD.
The Swedish retailer has a business relationship with 18 suppliers in Pakistan.
Roger Hubert, managing director of the RMG Sustainability Council (RSC) in Bangladesh who was earlier regional head for H&M for Bangladesh & Pakistan, as well as board member of the Bangladesh Accord, has deep insight into the region.
Asked if the brands that have invested a lot of money in Bangladesh could possibly afford to put as much into Pakistan, he said: “No, that is impossible. The brands cannot fund all markets to the same extent. I’m not involved with the International Accord, but if you look at it, the numbers in Pakistan are completely different.
“The money that has been put into Bangladesh has only flown into Bangladesh because a) it was an emergency after Tazreen and Rana Plaza, and b) Bangladesh was already one of the most competitive markets with the biggest capacity.
“I think the money will be completely different — it will not be comparable — although it will still be substantial money,” he said. “The majority of the brands in Pakistan are using mostly good factories — they are even ahead of Bangladesh in many aspects, so the need there is completely different. They are starting at a different level and don’t have to go through this catching-up-from-the-past to the same extent as Bangladesh had to do.”
It is also expected that the level of commitment required would be less since the number of brands working in Pakistan is less than those in Bangladesh, and the total amount of exports is smaller — textile and apparel exports from Pakistan last year were $19.3 billion, compared to the $42.61 billion from Bangladesh.
Clean Clothes Campaign, however, has a different take.
The CCC said that its study that commissioned researchers at the Wales Institute of Social and Economic Research and Data, and Cardiff Business School, Cardiff University, to look at garment and textile workers’ safety and health in Pakistan illustrates that rights for workers in the industry have hardly progressed in the country since the fire at Ali Enterprises factory in Karachi a decade ago.
However, with each passing year, supply chain checkbacks and certifications have become more stringent, and with a large bulk of manufacture from Asia, and a big portion of the buyers from the U.S., European Union and U.K., it is essential to bridge the gap in understanding and expectations between East and West.
“It was not generosity from the brands to have poured in that money,” Roger Hubert observed. “More that taking responsibility for your supply chain also means you have to participate in setting up your supply chain. Although the factory is responsible for ensuring safety — it’s not the brand’s responsibility — but if you go to a developing country, then don’t expect that they have the same understanding about what is safe and what is green and what is sustainable that you have with 100 years of advantage. There is a need for brands to calculate that into their pricing or into their margins, while the factories have to learn to include their costs into their prices — which today they don’t do, they still cut corners.”
Whether the global unions can muster the same level of rhetoric and pressure that they did after the aftermath of the collapse of Rana Plaza in Bangladesh, the agreement that took effect Jan. 16 has an interim three-year period for the Pakistan Accord.
The accord signatory brands source more than $2.6 billion worth of garments and textiles from Pakistan.
“We spent the last two years doing feasibility studies for different markets — this meant seeing the possibilities but also what is needed financially to work in the country, to hire engineers, build the organization and also the cost of the international secretariat in Amsterdam, which is coordinating all of this. This has to be put in relation to the number of expected signatories,” said Juette-Overmeyer.
There are synergies that make it easier too, he said. “We already have not only knowledge, but also manpower. There were a lot of costs in Bangladesh because it had to be built without these. For all parties it is clear we can’t add another Bangladesh budget on top of the existing one — definitely it must be less. On the one hand we are looking at the synergies, and on the other there is an agreement with the unions for a phased approach — so it is not like it will be there 100 percent on the first day, but rather kind of stepping stones to reach the first phase, then go on to the next. For example, the mills are included in the accord, but their implementation is clearly one of the later stages.”
The Pakistan Accord covers cut-make-trim facilities, namely ready-made garment, home textile, fabric and knit accessories suppliers including vertically integrated facilities with a plan to cover more than 500 factories that produce for the more than 100 accord signatory companies throughout the Sindh and Punjab provinces, where a large part of the industry is based.
Fabric mills within the supply chains of the signatories are also covered, with implementation scheduled for a later stage in the program.