Beyond the Tip of the Iceberg: Bangladesh’s Forgotten Apparel Workers

Beyond the Tip of the Iceberg: Bangladesh’s Forgotten Apparel Workers

Indirect sourcing, the key to Bangladesh's high-volume, low-cost model of garment production, is exposing factory workers to safety violations and labour rights abuses, a new report suggests.

'Beyond the Tip of the Iceberg: Bangladesh's Forgotten Apparel Workers', published by the NYU Stern Center for Business and Human Rights, reveals that many workers are employed in factories that supply foreign brands indirectly through other, larger factories or agents. 

These indirect sourcing factories operate, the report says, on very tight margins and with very little oversight, increasing the vulnerability of workers to safety violations and labour rights abuses.

The report is the second to be published by the NYU Stern Center and is the result of what it says was a large-scale analysis of factory data collected from publicly available sources and a field survey conducted in June.

The report outlines a number of key findings, including that there are, in fact, more than 7,000 factories producing for the garment export market in Bangladesh, divided between direct and indirect sourcing factories. Previous estimates put the number at around 4,500 factories. 

From 2013 to 2015, while the number of direct exporters remained constant, total apparel export volumes fluctuated substantially, the report noted. This is because either each direct exporter is able to dramatically increase and decrease its production in response to shifting demand, or the thousands of indirect suppliers enable direct exporters to accommodate significant shifts, it said. 

Additionally, a survey of two sub-districts of Dhaka in June found that 32% of the 479 factories surveyed were informal subcontractors – a subset of indirect suppliers. Around 91% of informal factories produce for export. According to the report, they do not register with the government, either of the two national trade associations of apparel manufacturers, or foreign brands. 

"Workers in this part of the sector are especially vulnerable because they are invisible to regulators and their employers operate on such slim margins that they cannot invest in even basic safety equipment or procedures," report authors explain. "This kind of subcontracting also artificially depresses prices because it does not account for the full cost of producing in accordance with minimum labour standards."

Since the Rana Plaza disaster in April 2013, the Bangladesh Accord for Fire and Building Safety and the Alliance for Bangladesh Worker Safety programmes, initiated by more than 200 foreign brands, have been carrying out inspections on the country's garment factories. As of November, around 2,185 factories had been inspected by both organisations. 

The programmes have received significant public attention and have committed to spend up to US$100m over five years to improve factory safety. The report, however, points out that they are "narrowly focused" on a subset of direct suppliers, with almost 3m workers not covered by the programmes, encompassing only 27% of factories in Bangladesh. 

And, despite the number of direct and exporting factory inspections carried out to date by the two organisations, the report suggests that only eight factories have passed final inspection.

Since Rana Plaza, more than $280m in commitments have been made for Bangladesh's garment sector by foreign governments, development organisations, philanthropies and foreign brands. However, the report points out that it is not yet clear how many of these resources are being spent or if any of the money is being applied to remediate factories. 

"It is clear that resources are not being directed towards the thousands of indirect suppliers that remain in the shadows," authors note. "There is not yet a clear understanding of what it will take to ensure that workers in these factories are safe and enjoy basic labour rights."

The report makes a number of recommendations:

  • Achieving visibility over the full supply chain at a systemic level, rather than in the context of each individual foreign brand, is a precondition for more completely fulfilling the rights of all of Bangladesh's apparel workers. The report suggests brands can play an important role in legitimising indirect suppliers as a source of productive capacity, but one that requires new approaches for oversight and compliance with labour standards. It also urges the Bangladesh government and trade associations to make information about regulatory systems that apply to direct and indirect suppliers available, and for foreign governments to put indirect sourcing on the global agenda.
  • "More and better" data is required to identify the full extent and size of the Bangladesh garment sector, the report says. It suggests the International Labour Organization (ILO), in cooperation with trade associations, unions, and the government conduct a comprehensive survey of direct and indirect sourcing in Dhaka and Chittagong. A further suggestion is the creation of a 'parcel map' of the two regions, which would enable factory surveyors to associate their findings with individual parcels, including information such as factory names, conditions, and images with specific geographic areas. This, the report says, would address the problem of poor availability of map information for Bangladesh; support a factory survey; and be useful in many other humanitarian and development contexts.
  • The government of Bangladesh should improve enforcement in the indirect exporting part of the sector. Raising the odds of inspection and even prosecution for labour rights and safety violations, the report says, (in addition to other regulatory obligations, such as taxation and business registration) among indirect suppliers would discourage firms from remaining informal and encourage factories to meet minimum standards of labour rights and worker protection. It also suggests investment by international financial institutions and the Bangladesh government in infrastructure development in electricity, transportation, and gas. And, improving access to capital for small- and medium-sized enterprises.
  • With the end of the five-year Accord and the Alliance commitment on the horizon, coupled with a worsening security situation and slow progress on labour rights reforms, the report suggests there is an urgent need for Bangladeshi leaders and factory owners to demonstrate that the country continues to be a good investment for the global fashion industry. It suggests the government strengthen the climate for mature industrial relations, in which independent unions can thrive, and urges Bangladeshi leaders and factory owners to take ownership of an international effort organised around the concept of "shared responsibility" to "realise a vision for a safe and sustainable garment sector".
  • Given the scale of the challenge presented by the large universe of indirect sourcing factories (in addition to well-known problems among direct sourcing factories), report authors believe a new structure will be required to organise ambitious action among key stakeholders. It suggests the formation of a task force, comprising senior leadership from within Bangladesh and international stakeholders, with a mission to develop a roadmap for a safe and sustainable garment sector in Bangladesh.