Subcontracting to unauthorised factories is often seen as the only possibility to turn a profit on a deal

Subcontracting to unauthorised factories is often seen as the only possibility to turn a profit on a deal

Time and time again, Western apparel brands and retailers whose products are found in fire-damaged or collapsed factories say garments were being manufactured there without their knowledge. Perhaps, says Doug Miller, the time has come to look more closely at buying practices - often the root cause of sub-contracting. 

David Birnbaum's comment on subcontracting in the Bangladesh ready-made garment (RMG) sector - Bangladesh factory inspection plans set to fail? - rightfully shows us the scale of the problem.

With only one-fifth of the factories falling under the radar of the North American and EU inspection programmes - incidentally, it will be interesting to see how many of the 'Accord' factories are shared by Gap and Walmart - and the latest preliminary inspection report on 70 ready-made garment units revealing only six to be in sound condition, there are grounds for pessimism.

When the Spectrum factory collapsed in 2005 none of the buyers who were sourcing from that factory were aware that they had production there. News of any disaster in the RMG industry in Bangladesh must cause any CSR manager to break out into a cold sweat given the random way outsourcing in the industry has developed.

Sourcing companies have, of course, tried to control this through the terms of their commercial contracts and even through their corporate codes of conduct, but these clearly fail to prevent transgressions. So what is to be done with the remaining 4,000 units in the industry? 

We could start by examining the root cause of the subcontracting problem. 

Way back in 1850, when Charles Kingsley was not writing his fantasy novel about child labour in chimney sweeping in Victorian England, he interviewed the tailors of London, publishing his findings in an essay called Cheap Clothes and Nasty.

In his description of the race to the bottom in the London clothing trade he divided it into the honourable shops in the West End which numbered only 60, and the dishonourable which numbered 400 and more; while in the East End of the city "the dishonourable trade had it all its own way".

But it was his description of the "sweating problem" which has such validity today:

"For at the honourable shops, the master deals directly with his workmen; while at the dishonourable ones, the greater part of the work, if not the whole, is let out to contractors, or middle men - "sweaters", as their victims significantly call them - who, in their turn, let it out again, sometimes to the workmen, sometimes to fresh middlemen; so that out of the price paid for labour on each article, not only the workmen, but the sweater, and perhaps the sweater's sweater, and a third, and a fourth, and a fifth, have to draw their profit."

Kingsley lifts the lid on two key factors which drive this process: the prevalence of a middle tier of contractors and the practice of "sweating".

In researching for the book on Spectrum, I came across the Bangladesh Garments and Textiles Directory which, in 2002, contained a section on local agents of foreign buyers. The 2002 issue had some 907 such agents.

Some of these companies can provide valuable local services to buyers, but it comes as no surprise that those retailers which have invested their production in Bangladesh have also set up their own in-country sourcing offices. Further research on how subcontracting is managed is certainly needed.

As much of the attention following the collapse of Rana Plaza focuses on institutional failure, there is a danger that the issue of "sweating" drops off the agenda.

It is ironic that vast amounts of money and effort have been spent on the development of industry standards in the field of social compliance whilst the issue of buying practices, arguably the root cause of non-compliances, has yet to be subject to the same scrutiny and regulation.

With year-on-year pressure on margins, demands to factor in compliance costs, tighter leadtimes, and extended payment schedules, resulting in a squeeze on the CMT price and capacity, first tier contractors may have little option than to see sub-contracting as the only possibility to turn a profit on a deal.

Whilst an open debate on this issue is long overdue, it would be naïve to assume that greater integrity in buying practices would of itself address the problem.

Just recently a buyer in Bangladesh who had been making significant strides to improve wages in one of its supplier factories was shocked to find its production had been outsourced.

So there is a need to regulate a sector which has thus far been self-regulating.

If the ILO/IFC Better Work initiative is to commence in Bangladesh it would do well to start with a programme of inspections beyond the 1000+ factories covered by the 'Accord' and 'Safer Factories Initiative' and widen its scope to monitor the legitimacy of orders passing through a factory at any given time.

Doug Miller - Emeritus Professor: Worker Rights in Fashion, University of Northumbria - is the author of 'Last Night Shift in Savar, the Story of the Spectrum Sweater Factory Collapse,' published in 2012 by McNidder & Grace.