Bangladesh: CGWR Research Report on Workers Rights, Safety - Five years after Rana Plaza Diasater

Binding Power: The Sourcing Squeeze, Workers’ Rights, and
Building Safety in Bangladesh Since Rana Plaza

by Mark Anner, Center Director, Penn State

Research report

March 22, 2018

Executive Summary

Despite more than two decades of private voluntary approaches to address workers’ rights abuses in apparel supply chains, workers in the lower production tiers continue to face poor working conditions and chronic violations of their rights. Bangladesh has been emblematic of low wages, poor working conditions, union-avoidance, and a series of mass fatality disasters in garment factories, culminating in the collapse of Rana Plaza in 2013. With the five-year anniversary of the catastrophe approaching , the question arises as to whether the intervening years have seen meaningful gains for workers.

This report finds that gains have been severely limited in regard to wages, overtime hours, and work intensity in part due to the sourcing practices of the brands and retailers that sit at the top of global supply chains. A partial exception is in the area of associational rights, where, in the aftermath of Rana Plaza, pressure from the European Union, the United States, and international organizations resulted in minor pro-union labor reforms. These reforms, combined with the tenacity of workers and their organizing efforts, resulted in an increase in the number of recognized unions. However, in recent years, union growth has once again stagnated, indicating the need for continued international pressure and for an expansion of the capacity of garment sector unions.

This report finds one area where gains for workers have been dramatic: building safety. This is largely the result of an unprecedented binding agreement, the Accord on Fire and Building Safety in Bangladesh. The Accord, which imposes constraints and obligations on global firms that are absent from traditional voluntary CSR schemes, has overseen a massive program of safety renovations and upgrades. No doubt, the Accord has faced challenges. One area of concern has been substantial delays in the full remediation of all Accord factories, which is compounded by the fact that new factories join the Accord on a regular basis as buyers expand their pool of supplier factories in the country. Yet, the program has delivered an improved margin of safety for more than 2.5 million garment workers and upgrades that have eliminated more than 97,000 identified hazards across more than 1,600 covered factories.

In May 2018, the Accord will end its mandate and be replaced by the ‘2018 Accord,’ which will expand safety committees and safety training to all factories in member networks (no limit on factory tiers), broaden the Accord’s scope to related industries, and increase support for freedom of association rights as they relate to occupational safety and health.

Summary of Our Findings

• The hyper-competitive structure of apparel global supply chains has contributed to a buyer-driven sourcing squeeze that has pushed down prices, shortened lead times, and contributed to low wages, health and safety concerns, and violations of freedom of association rights.

• In the case of Bangladesh, since Rana Plaza, the price paid by lead firms to supplier factories has declined by 13%. The cause of this decline cannot be linked to the price of cotton or exchange rate fluctuations. Rather, it is related to a retailer and brand pricing squeeze on supplier factories, whose profit margins decreased by 13.3% from 2011 to 2016.

• Lead firms have also significantly pushed their supplier factories to make products more quickly as part of a trend toward speed to market and fast fashion. On average, lead times declined by 8.14% between 2011 and 2015. This has increased a pattern of forced overtime and work intensity.

• This price squeeze has contributed to declining real wages and an increase in workers’ rights violations since Rana Plaza. Real wages have dropped by 6.47% since the wage increase of December 2013, and – based on data provided by the Labour Rights Indicators – violations of workers’ rights to form unions, bargain, and strike increased by 11.96% between 2012 and 2015.

• Within this challenging context for worker organizing , limited progress has been made in the formation of new unions, most notably in the year following Rana Plaza, when international pressure was most pronounced and in the context of some pro-union labor reforms following. Combined with the determined efforts of garment workers between the middle of 2013 and the end of 2014, some 228 new unions were registered in Bangladesh. However, by late 2014 and 2015, the government rejection rate of union registration escalated.

• Despite the ‘sourcing squeeze,’ sweeping change has been achieved in the area of building safety, where the Accord on Fire and Building Safety in Bangladesh set the tone for rigorous building inspection and remediation. Because the Accord grants worker representatives real power in its governance structure, holds firms responsible for the impact of their sourcing practices, obligates them to cease business with unsafe suppliers, and is legally-binding – it has compelled changes in buyer behavior and created powerful incentives for factory owners to carry out safety renovations.

• Since 2013, the Accord has identified 131,953 high-risk fire, structural, and electrical safety violations in its current group of 1,621 factories and corrected and verified 97,235 of these findings – an average of 60 violations corrected per factory. Some 795 factories have an initial findings remediation rate of 90% or higher. Some 961 factories have an initial findings remediation rate of 85% or higher.

• The Accord has terminated 96 factories for their failure to implement required safety renovations, meaning that these factories can no longer sell goods to any Accord signatory brand. The Accord also identified 50 factories where the structural integrity of buildings fell below the acceptable level of safety and found that these buildings required temporary evacuation due to their severe and imminent risk of structural failure. In this regard, the Accord has been fulfilling its most crucial mandate, to prevent another Rana Plaza.

• At the start of the Accord, some 969 factories had inadequate circuit breakers, a crucial potential cause of fires. By March 2018, 82.8 % of these cases were fully remediated. And while 97% of Accord factories in 2013 lacked safe means of egress due to lockable or collapsible gates, by March 2018, 96.5% of factories had addressed this issue.

• This report finds that the Accord also has begun to more broadly re-structure the geography of production in Bangladesh. Notably, multi-purpose buildings in urban locations have been a particular challenge for building safety because these buildings were not made specifically for industrial production; Rana Plaza was a multi-purpose building. The number of Accord factories in multi-purpose buildings dropped from 2014 to 2018 by 49%, from 155 factories to 79 factories. In the process, data indicate that production moved from the over-crowded inner city of Dhaka to the larger industrial zone of Gazipur.

• The Accord has provided in-depth health and safety training to personnel in 846 factories and has investigated and resolved 183 worker complaints. While the Accord mandate does not cover freedom of association as a general right, the Accord does have authority to address the issue when managers retaliate against unions for raising building safety issues and when managers use violence to thwart worker organizing. The Accord has investigated and successfully remedied a number of important freedom of association cases, including securing the reinstatement of illegally fired workers.

• Significant problems and delays remain. Most factories that have not completed safety renovations are behind schedule relative to the original Accord-imposed deadlines – 1,247 factories in total. Some 823 factories still lack fire detection and alarm systems that are up to code and 286 factories have not correctly implemented their structural load-management plan.

• In 2017, the signatories of the Accord made the decision to continue many of the Accord’s main elements, while expanding its scope and coverage through May 2021. As of March 9, 2018, some 121 brands and retailers committed to the ‘2018 Accord.’ This represents approximately 55% of the current Accord members. These brands and retailers are among the largest Accord members; they have 1,275 supplier factories in Bangladesh, which account for 79% of the current number of factories covered by the Accord.

• Overall, the Accord model has been a success because it was negotiated between buyers and trade unions, because it holds suppliers as well as buyers responsible for the cost of safe buildings, because it is legally binding, and because it is transparent. It also has the crucial resources it needs – USD 11 million per year from 2013 to 2018 – to pay its approximately 94 specialized engineers and other support staff. The challenge for building safety in Bangladesh going forward is to develop full state capacity to carry out this task, while also maintaining buyer shared cost responsibility. In the process, the full and protected participation of workers and their unions remains crucial to this effort.

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Binding Power: The Sourcing Squeeze, Workers’ Rights, and Building Safety in Bangladesh Since Rana Plaza

Center for Global Workers’ Rights, Penn State | March 22, 2018