SOURCING: Alliance members buying more products from Bangladesh
The Alliance for Bangladesh Worker Safety has reached its first anniversary
The group of North American brands and retailers - including Wal-Mart Stores, Gap Inc and VF Corporation - working to improve safety in Bangladesh's ready-made garment factories appears to be sourcing more products from the country as efforts to upgrade the industry take hold. But one year on, progress is "far from over", with the total cost likely to be in the region of $150m and take 12-18 another months to complete.
Speaking on a briefing to mark the first anniversary of the Alliance for Bangladesh Worker Safety, Ian Spaulding, a senior advisor to the group, told just-style that preliminary estimates suggest the 26 member companies "are actually sourcing more product from Bangladesh than last year at this time."
"People are realising that you can't just buy from any factory, you've got to make sure they meet a certain level of performance."
Spaulding, who is a senior partner at Elevate Limited, the company leading the Alliance's factory inspection and remediation efforts, also said there had been a "tremendous" amount of consolidation, where buyers are buying from fewer factories - which is not only "good news" but also one of the "great outcomes" of the initiative.
"We're buying more product and also we know we're actually using fewer factories. We'll be able to report the final information later as we finalise the data, but we're buying more from fewer factories, we have greater leverage and we're ultimately able to drive change by impacting the remediation work within a factory," he said.
If confirmed, this trend appears to support hopes that the initiatives currently underway in Bangladesh will help propel the country's garment export sector into a world-class player with strategic alliances between buyers and suppliers.
But it also flies in the face of the most recent US data, which shows the volume of imports from Bangladesh has fallen 3.8% in the first five months of this year as the confidence of many buyers wavers in the aftermath of last year's factory safety issues and subsequent strikes and disruption as a pay rise was negotiated for apparel workers.
"Not pulling production"
Spaulding was keen to stress "we are not pulling production and moving out of the factory, we're just consolidating, and that has been done over the past one year. There has been a constant revisiting."
Indeed, from the original 630 garment factories listed when the Alliance was set up - a list that climbed to around 700 at one point - this is now down to a core group of 587 factories used by member companies.
"Part of the challenge is that the garment industry is incredibly fluid, and we have a very dynamic supply chain. As we move from spring to fall there are different factories that are often employed by member companies to source a different product; sweaters are not a year-round business. So what we've seen is consolidation.
"But when business moves on that doesn't mean the factory closes or the factory is unsafe, it often means there has been a decision that we can buy more product from fewer factories."
He said the list of active factories had fallen based on seasonality, the wrong definition (some were footwear or furniture facilities), different factory names, or inactive factories.
Conversely, around 30 additional factories are likely to come on-stream over the next few months - with this again due mainly to seasonality.
"But you're not going to see a massive increase in the number of factories, partly because of our policy that new factories that get added must meet the Alliance standard before production starts.
"We're trying to remediate those factories already in our supply chain but also make it harder to add new factories."
All Alliance factories inspected
Among the highlights in its first anniversary update, the Alliance said it has completed fire and building safety inspections on all 587 factories used to supply clothes to its members - who also include Fruit of the Loom, JC Penney Company, Macy's, Nordstrom, Sears Holdings and Target Corporation.
Of these, ten factories have been fully or partially closed, after serious structural faults were revealed by inspections.
But nearly every other factory also requires some improvement or upgrade to achieve compliance with the new safety standards - and more than half of these are already undergoing remediation.
Issues include a lack of sprinkler systems in some 98% of the factories, while more than 95% lack proper fire doors, which are critical to contain the spread of flames and smoke between floors of a building.
In many cases factories have pipes and fire hoses that are only 2 inches in diameter instead of the required 4 inches, which cuts in half the water capacity available to extinguish a fire in a building. Many factories also have electrical wiring systems that lack independent circuits and without proper grounding, raising the likelihood of an electrical shortage or hazard.
These issues will be the main focus of the Alliance's efforts in the next 12 to 18 months.
"Many factories will remediate very quickly; they want to get this behind them and get their factories safe and build their business," Spaulding explained. "For others it's going to be much harder."
He added: "You cannot upgrade this industry overnight, it's going to take time." Challenges include coordinating safety efforts in shared buildings where two competitor factories operate. There is also a lack of internationally certified fire and electrical equipment in Bangladesh, and delays of 90 days to get items like fire doors imported into the country.
Cost of remediation
When it comes to the cost of remediation, the average per factory is estimated at $250,000 - taking the total for the industry to US$146.75m. That said, the Bangladeshi government's decision to eliminate tariffs of up to 130% on imports of safety equipment will reduce this somewhat.
For some factories the cost will be a lot higher, especially tall buildings above seven storeys - around 20% of the total 587 - which require the installation of sprinklers. The cost at one such factory was closer to $600,000, Spaulding said.
He also noted that "a fair amount of factories are resisting" remediation.
However, a factory that does not remediate is classified as non-compliant and is not authorised for production for any of the Alliance members, "so we have a fair amount of clout to drive remediation.
"We have to figure out ways to convince them it's the right thing to do and to make capital available."
Also speaking on yesterday's call, the Honorable Ellen Tauscher, former US Congresswoman and Alliance independent chair, said the group has just agreed a new case management process to constantly monitor the remediation efforts.
"We need to make sure these remediations are not fits and starts and that there is consistent work being done, that we see the purchase orders for fire doors, that we know and have visibility into the progress.
"Because there will be a final inspection to prove that this has gone through the entire process. We gave ourselves five years for a reason."
Alliance first-year milestones
- Developed and implemented the country's first harmonised Fire Safety and Structural Integrity Standard
- Identified and hired seven professional local companies to serve as Qualified Assessment Firms to conduct independent inspections
- Inspected 100% of the 587 factories used by its members
- Began rolling publication of all inspection reports and Corrective Action Plans to Alliance website
- Recommended to the NTC Review Panel to close or partially close ten unsafe factories
- Members backed over $100m in capital for their respective supply chains
- Provided several finance options including short- to medium-term loan guarantees through the IFC and supply chain-based financing
- Members began to formalse direct loans to factories to undertake remediation
- Successfully advocated to the government to eliminate tariffs on key safety equipment, making critical items significantly more affordable
- Doubled the duration of compensation provided to displaced workers from two to four months
- Disbursed wages to approximately 1,000 workers displaced by factory remediation to date
- Developed the Alliance Basic Fire Safety Training module
- Trained more than 1m workers and managers in basic fire safety
- Hosted the country's first-ever International Trade Expo for Building and Fire Safety in Dhaka with nearly 3,000 vendors, factory owners and safety experts to increase access to affordable high-quality safety equipment and expertise
- Conducted the largest worker survey ever administered in Bangladesh with more than 3,200 workers
- Conducted follow-up limited sample survey with 683 randomly selected workers to assess progress in worker awareness
- Established an Alliance Worker Helpline, Amader Kotha, which will be piloted in 50 factories
- Appointed three prominent Bangladeshi labour leaders to its Board of Advisors
- Created a Board committee dedicated exclusively to labour issues comprised of seven trade union leaders
- Invited worker representatives to be part of the factory inspection process and shadow assessments
- Amended the Alliance Members Agreement to include a worker's right to refuse unsafe work
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