Bangladesh factories have raised their game – but buyers are not responding with higher prices

Bangladesh factories have raised their game – but buyers are not responding with higher prices

Bangladesh's apparel makers have invested heavily in improving factory safety since the 2013 Rana Plaza disaster, but global buyers are still failing to pay fair prices and following non-transparent purchasing practices, a conference in Dhaka has heard. 

Speaking at a conference on Sustainable Sourcing in the Garment Sector (SSGS), held in the Bangladesh capital, policymakers, producers, retailers and experts stressed that the race to the bottom should be stopped, as the industry needs to move from paying minimum wages to living wages. 

The insights came at the day-long event designed to spread best practice, organised by the Embassy of Netherlands in Dhaka in collaboration with the International Apparel Federation (IAF) and the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). 

Addressing the opening session as the chief guest, Bangladesh's commerce minister Tofail Ahmed said his country considered the 2013 Rana Plaza disaster to be a "wake up call", which has since helped the country avoid any further major accident. 

He insisted of the 3,700 factories inspected afterwards by the Alliance for Bangladesh Worker Safety and the Bangladesh Accord on Fire and Building Safety, only 39 were found to be "vulnerable" – just 2%, he stressed. 

The minister said owners had renovated factories and raised minimum wages after Rana Plaza, but said buyers had not increased purchasing prices to match.

His Dutch counterpart, who sponsored the conference, shared similar concerns.

Sustainable sourcing

Lilianne Ploumen, minister for foreign trade and development cooperation of the Netherlands, cited research findings and noted that last year (2015) retailers paid Bangladeshi manufacturers only 1% more than in 2012, even though they had made expensive improvements to their factories. "Clearly, "this is untenable," she pointed out.

She argued that Bangladesh is now home to some of the world's "best and greenest" garment factories.

Ploumen did not mind brands finding a smart way of cutting prices, but said, "holding a gun to producers' heads is a different matter entirely." She added: "Low prices are fine by me – as long as they don't lead to unsustainable practices. Unfortunately they do." The minister declared: "Sustainable sourcing is the right way forward, and the only way forward."

The Dutch minister also advocated sustainable purchasing practices that do not focus on price alone, but also reduce water, environmental and pollution footprints. "It is those last few euros that make the difference between a garment that has been produced fairly and a garment that results from exploitation. Consumers are becoming more and more alert to this," she said. "I sense a growing awareness to pay more for clothing if it means you're not buying 'blood garments'" she added.

Ploumen was highly critical of what she regarded as buyers' unreasonably short delivery deadlines, regular late cancellation of orders, lack of transparency and lack of trust. Producers and brands need to work together much more effectively, she argued. 

This would help prevent some producers paying low wages, systematically imposing overtime, and subcontracting to factories that flout the rules, she maintained. 

Adding that transparent pricing can also promote sustainability, the Dutch trade minister said brands sometimes scarcely pay cost price. "But I say to producers: have the courage to sometimes say 'no'...Make use of your online presence and the transparency that can provide. Others can see this information. It gives you a power that brands really need to take seriously," she said.

Indeed, some major fashion chains, as well as governments such as in the Netherlands and Germany, have said they want to promote living wages, she said, urging leading Bangladeshi garment makers to sign a labour agreement for the industry, which would highlight their good intentions.

Collective initiative

In his welcoming address, BGMEA president Md Siddiqur Rahman said Bangladesh has "perhaps the safest apparel industry in the world," thanks to the collective initiative of the government, buyers and development partners in the last three-and-a-half years.

Besides making factories safer, the industry is moving towards environmental sustainability, with 33 factories getting certification from the US Green Building Council and 11 of those receiving platinum ratings, Rahman said.  

In one session, panellists were optimistic that the US$650bn global apparel market offered space for all exporting countries, including Bangladesh. But the South Asian sourcing hub still faces demands for lower prices and shorter lead times, they said.

Due diligence guidelines

In a session on the international trade framework, Roel Nieuwenkamp chair of the Organisation for Economic Development & Cooperation (OECD) working party on responsible business conduct, presented the Paris-based grouping's draft due diligence guideline for ready-made garments, which will be finalised in November this year.

While Nieuwenkamp admitted it would not be legally binding, he hoped that the industry would regard it as "morally binding". 

Miran Ali, managing director of Bitopi Group, a casual trousers manufacturer in Dhaka, insisted that Bangladesh today is ahead of any other supplier countries so far as garment industry compliance with social rules is concerned. "Few countries in the world have mandatory workers' safety committees," he said. 

He favoured following the OECD guideline, but argued that innovation is key to breaking the low price barrier.

Purchase prices

Speaking as a panellist at another session, Helena Helmersson, global head of production at Hennes & Mauritz (H&M), underscored the need for strong relations with suppliers and argued that quality, sustainability and supplier commitment are factors that affect prices.

When considering what affected her company's setting of purchase prices, she said the global brand had a lot of work ahead of it to sustain and maintain sustainability, but predicted H&M would stay the course. "We are not perfect, but I represent a company that cares about profit for next generation…", planning for future as well as current profits, she predicted.

Other speakers at the conference discussed issues such as water, energy and chemical usage, waste management, market diversification and industrial supply chain structures. 

Rubana Huq, managing director of Bangladesh garment maker Mohammadi Group, wondered if there really were "green buyers" as the talk of "green factories" gained wider currency. "Everybody talks about fair wages, but not fair price," she said.