I recently attended the launch of Swedwatch's report, A Lost Revolution? It was a mixed affair with attempts to celebrate the completion of a job well done being overshadowed by the harsh reality of the terrible working and living conditions that are still being endured by the 3 million female garment workers in Bangladesh.
The Ready Made Garment (RMG) industry is the backbone of the Bangladesh economy, being the world's third largest garment producer. The RMG sector accounts for 80% of total exports, bringing in nearly 18 million US dollars of revenue each year. A recent report by McKinsey & Company Inc. heralds Bangladesh as the next mecca for Western brands, lured by cheap labour, a well-established market, and the potential to increase productivity to make up for waning profit margins and concerns over capacity in China. Output from Bangladesh is expected to treble by 2020. What is clear from both the Swedwatch and McKinsey reports is that the 86% of Chief Purchasing Officers that are looking to move part of their sourcing from China to Bangladesh should be aware that their race to the bottom comes with strings attached. Or at least it should.
Many of the 3 million female workers who make up 80% of the total RMG workforce are migrant workers who leave their children and families in rural villages in order to seek work in Dhaka or Chittagong, the main industrial clusters for the textile industry in Bangladesh. Despite working up to 72 hours a week, many do not have enough money to cover decent living costs and live in slums where they share bathroom and kitchen facilities with up to 20 other women. They have limited access to potable water and sanitation facilities are poor, exacerbated by flooding during the monsoon season. Their electricity supply is sporadic, sometimes lasting only a few hours per day.
Following huge protests in June 2010, the government's Wage Board decided to virtually double the minimum wage to 3000 taka per month (about 27 Euro), and average monthly earnings are now around 4500 taka after 12-20 hours' overtime each week. According to Nazma Akter, Executive Director of the Awaj Foundation, up to 60% of this goes to housing costs. There are a number of different suggestions as to what a living wage should be in Bangladesh; while NGO's and trade unions call for a minimum wage of 5000 taka, Asia Floor Wage suggests a more accurate living wage, considering the additional costs of living in the cities, is nearer 12,000 taka.
At the Swedwatch launch, Mohammed Zahidullah from DBL Group, one of the largest knitwear manufacturers in Bangaldesh, explained that there is considerable scope for increasing wages as this can easily be mitigated by productivity and efficiency gains. He gave an example of how increased health education and improved living conditions could significantly reduce sick leave, which currently results in productivity losses of up to $250,000/mth for DBL Group. Reducing sick leave is of course directly linked to living conditions for the workers as well as health education and the availability of affordable medical care, something which more progressive companies operating in Bangladesh will need to consider carefully as part of their corporate citizenship programmes. Zahidullah went on to describe, however, how attempts to raise wages unilaterally at DBL caused outbreaks of violence (such as stoning the factory) and abuse from other local factory owners. This illustrates the need for an industry-wide approach to addressing key issues such as medical care, excessive overtime and a living wage.
Indeed, a key mesage in the Swedwatch report is the need for social dialogue and multi-stakeholder engagement to ensure sustainable development in Bangladesh. As the McKinsey report states, factories are located primarily in two regional clusters, Dhaka and Chittagong,and this provides an excellent opportunity for value chain transparency through a multi-stakeholder industry initiative to combat issues such as poor worker education, a high risk of labour contracting and the establishment of decent labour conditions. The government, fearful of losing competitiveness to other countries such as Vietnam, Cambodia and Indonesia, needs assurances from buyers that they are looking to invest in long-term sustainable development, not short-term cost reductions. The fact that price sensitivity is the main reason for increasing trade with Bangladesh in the first place may well undermine the credibility of any such claims.
Neverthless, during the panel debate at the launch of the Swedwatch report, Helena Helmersson, Head of Sustainabililty for H&M, further iterated the importance of stable market conditions for buyers such as H&M in her call to action for the textiles industry, trade unions, NGOs and the Bangladesh government alike, pointing to H&M's work with the Fair Wage Network. What emerges clearly from both the Swedwatch and the McKinsey reports is the need to engage in multi-stakeholder collaboration with a focus on shared value creation and value chain transparency. The UN Guiding Principles for Business and Human Rights provides a compelling framework for addressing issues relating to the allocation of responsibilty for both government and business, so let’s hope that there is still a chance that a lost revolution will turn into sustainable evolution for an industry struggling to retain legitimacy in its race to the bottom.