Making a statement for improving transparency and convenience for labor, H&M on Wednesday became the first fashion retailer to join a movement to digitize cash payments for workers in its supply chain.
The Better Than Cash Alliance, which is part of the United Nations Capital Development Fund has 60 members, more than 25 of which are governments across the world. The organization focuses on the use of digitization to replace cash, leading to greater security, financial inclusion and economic and time savings for workers.
“This will improve the livelihoods of its workforce, enhance transparency and cut factory costs,” Gustav Lovén, global social sustainability manager for H&M Group, told WWD.
Sixty-five percent of the 1.6 million people employed along H&M group’s supply chain are women, many of whom have limited access to the financial services they need to create a better life for themselves and their families. “What is so great about this is that we can move forward in using technology to drive social impact together along with sustainability,” he said, adding that the initiative would start in the countries where the alliance is already working, which overlaps with H&M sourcing. These include countries like Bangladesh, India, Pakistan and Vietnam, but will continue to expand across other areas.
On Wednesday, the Better Than Cash Alliance also released a report about the Bangladesh garment sector based on a survey conducted by the World Bank. Called “Digitizing Wage Payments in Bangladesh’s Garment Production Sector,” the report highlights the fact that digital payments can bring about more economic freedom for workers, as well as lower costs for factory owners.
More than 80 percent of the four million workers in the apparel industry in Bangladesh are women.
The report is especially relevant given that the theme for International Women’s Day this year is “Women in the Changing World of Work: Planet 50-50 by 2030.”
The report noted that women often have limited control over their earnings when paid in cash, due to a tendency for household finances to be controlled by males. Cash wage payments can be more easily stolen or misappropriated; records of these were more difficult to maintain accurately, and are more frequently subject to human error and can reduce productivity, the report noted.
One of the key points of digital payments is ensuring the accuracy of workers’ payments and reducing the risk of loss or theft of wages for workers.
In Bangladesh, for example where 90 percent of the $40.4 billion in wage payments are made in cash, increasing the digital payments could have a dramatic effect.
Tidhar Wald, head of government relations and public policy at the Better Than Cash Alliance, said that, when paying workers in cash, the anonymity, the lack of traceablility, the elusiveness of cash payments make it very difficult to account for these payments. Moving to digital payments helps governments, factories and brands, he explained.
The survey of apparel factories in Bangladesh that have already introduced electronic wage payments found that workers preferred the safety and convenience of digital payments. Employees’ satisfaction rises over time, and is higher in the second year after the shift, the survey concluded.
“Across factories surveyed, the costs of paying wages in cash were considerable. The survey highlights the opportunity cost of loss production borne by factories when wage disbursement is made in cash. It estimates that each worker spent on average 18 minutes per month off the production line to receive their wages in cash. This equates to 750 hours of lost revenue from production per month for a factory with 2,500 employees,” the report noted.
However, as Gustav Lovén of H&M observed, collaboration continues to be key to the process of change.
“We are trying to take a lead to transform the fashion industry, but transforming an industry is not something we can do on our own. That is something to be done in collaboration with other like-minded companies, stakeholders including our suppliers, the government, civil society other international organizations. By increasing those kind of partnerships we can sustain change, which we are fully determined to do,” he said.