1. Labor & Human Rights
Garment industry is considered to be a ‘foot in the door industry’, a key industry in kick-starting industrial development (Gereffi, 1995; DfID, 2000), meaning that for developing countries garment industry is generally the entrance towards its development journey. Because of a company’s ability to shift its production easily, the garment industry is also often referred to as a ‘footloose industry’ (Gibbon, 2002; Rivoli, 2006; Seidman, 2009). Therefore, these companies are always looking for Labour –intensive countries with cheap and abundant labour. With industrialised countries holding the main buying power in the industry, so-called buyer-driven global value chains structure the intensive competition in the industry, with one outcome being a predominant emphasis on cost control and efficiency (Gereffi & Memedovic, 2003; Kaplinsky, 2005). Fierce competition between governments to provide incentives has resulted in low wages and poor working conditions, described by some as a race to the bottom (Silver, 2003). Besides low wages and poor working condition other issues which have been realised are abusive management, trade union rights, insecure contracts (or no contracts), wages, health and safety conditions, and so on.
1.1 Working condition
The working conditions of factories in the Garment industries have come under much scrutiny by human rights organisations and labour rights organisations around the world and these organisations have been involved a great deal in pursuing these brands and retailers to accept responsibility for the implementation of decent working conditions throughout their supply chain. Bangladesh is the foremost runner in exporting garment all over the world. Bangladesh had a series of accidents from 2008 – 2013 brought the world attention to Bangladesh garment industry and the working standards. Despite being part of the International Labour Organisation’s Decent Work Agenda (ILO, 2012) Bangladesh could not provide safe and healthy work environments and conditions for the factory workers in this industry. “Popularly known as “sweatshops”, garment factories are usually small, enclosed buildings with little ventilation. There are poor lighting conditions, and workers are forced to toil for long hours in cramped spaces. These inadequate safety conditions have resulted in disastrous fires which have claimed the lives of many innocent workers” (Kurpad M.R, 2014, pp. 80-96). Insufficient safety standards and poor wiring were the causes of fatal factory fires in Bangladesh. In 2010, a deadly fire blaze at the Garib & Garib Sweater Factory claimed 21 lives and injured 50 people (BBC World News, 2010). In 2013, the collapse of an eight-story Rana Plaza in Dhaka (Manik et al., 2013) resulted in a final death toll of 1,127 people (Hossain and Alam, 2013), one of the worst in Bangladesh’s history as a world leader in garment exports and this accident got the world’s attention to Bangladesh. This accident was preceded by another fire in 2012 which killed 100 people (Bajaj, 2012). Apart from unsafe working condition at these factories, workers also face harassment. Moreover, ‘these poor workers have no job security or security of work tenure’ (Kurpad M.R, 2014, p. 80-96). They are forced to work for long hours, toiling for 8-12 hours a day, sometimes for all seven days in the week just to make ends meet (Robinson and Falconer, 2013). Workers have no social security, no insurance as the owners have no consideration for the health and welfare of workers. “Trade union rights are not adequately protected under Bangladeshi law and the formation and activity of unions is strictly controlled,” (Robinson and Falconer, 2013) which results in weak Trade Union Organisations and henceforth are not able to fulfil demands of the workers effectively. Hence, ‘failure of collective bargaining has largely been due to the lack of unionism in the Garment sector (Kurpad M.R, 2014, p. 80-96).
Tier 1 companies are those companies which combine the supply chain of big brands. These tier 1 firms represent a category of companies that have increased both their international competitiveness and their aptitude to meet the quality demands of top brand companies, some of them would suffice the criteria of decent work, defined by the ILO as “productive work for women and men in conditions of freedom, equity, security and human dignity” (ILO, 2001, p. 4). However, working conditions remain poor. Many tier 1 companies operate in developing countries where laws respect to labour are lenient or provide little protection to the labours. Therefore, workers are vulnerable to unhealthy working conditions, unfair dismissal, abusive behaviour practices etc. The absence of a state-guaranteed safety net—such as unemployment benefits, severance payments and pensions—creates a situation in which workers have few escape options, particularly when labour markets are not tight (Merk J. , 2014, p. 277-295).
1.3 Abusive behaviour
Commercial dynamics and economic restructuring of global production has broken down traditional two-season cycles and paved a fast fashion culture that translate into shorter lead times (Hale, 2000; Tokatli, 2012). Unfortunately, the downside of these shorter lead time and small quantities is that pressure to achieve the deadline is high. Moreover, there is less scope of productivity lapse and shop floor managers have high pressure to meet the target. Ensuring the number of working hours is reasonable and evading harsh language and inhumane treatment are the most likely codes to be breached (Ruwanpuray K.N, 2016, p. 423-446).
1.4 Increasing Profits by Improving productivity.
Quota restrictions were imposed on garment exports under the international trade regime known as the MFA. However, the international garment trade was opened at the end of 2004 following the termination of the MFA. Cambodian garment exports experiences intensified price competition from its competitors such as China and Vietnam. However, Cambodia’s garment exports also increased every year over the period 2002–2008. ‘It increased by 53% between 2002 and 2004 and by 123% between 2002 and 2008 and amounted to US$2.9 billion by 2008 (Cambodia Ministry of Economy and Finance data)’ (Asuyama Y., et al. 2013, p. 50-70).
‘According to data compiled from Cambodian Ministry of Economy and Finance sources, the unit value of garment products exported from Cambodia increased slightly up to 2003, but followed a gradually declining trend thereafter. During the 2002–2008 period as a whole, the unit value of garment products fell by 23%. Even so, the overall quantity of Cambodian garment exports showed a continued steady expansion, increasing by 191% during the same period (Figure 1)’ (Asuyama Y., et al. 2013, p. 50-70).
Even after such intensified competition, Cambodia was able to sustain considerable growth. They grew not only with respect to export, but also in regard to Number of firms and employment in the sector (garment firms increased from 188-284; Worker employment increased 210,000-325,000 (Cambodia Ministry of Commerce data)) (Asuyama Y., et al. 2013, p. 50-70).
Figure 2- Share of Profit and cost in gross product. Note profit is residual after subtraction of costs from gross product; tax is included in profit.
Source: Asuyama Y., et al. 2013, p. 50-70, 2013, p. 50-70
To continue to grow when selling price are decreasing, a firm either needs to cut its Overhead costs or its profit margin. If reduction of costs is greater than profits, share of costs in gross product become smaller and accordingly share of profits increases. The survey results show that the average share of profits in gross product increased from 25% in 2002 to 32% in 2008 (Figure 2). It can also be seen that, Material costs decreased and Labour costs rose. Average wage did not fall and labor productivity made large improvements, it is presumed that Cambodian firms successfully reduced costs by improving productivity rather than wage cut ((Asuyama Y., et al. 2013, p. 50-70), 2013, p. 50-70).
Further understanding of the statistics shows that wages for low-skilled and least experienced workers (operators and helpers) also increased, but in contrast, wages for highly skilled employees such as managers and executives, engineers and quality controllers decreased i.e. the wage gap narrowed. The increase may be because of longer working hours, which changes welfare improvement in terms of monthly wages. This created employment opportunities for poor low-skilled people. This welfare improvement was partly responsible for the productivity and efficiency improvement in Cambodian garment firms.
1.5 Performance related Code of conduct
As we had mentioned about Tier 1, they are suppliers to higher end retailers, there are also lower level suppliers who cater to lower end retail market. Majority of these tier 1 suppliers have codes in place. However, at lower level even if the codes were implemented, many times the workers were aware of the inspectors who enforced codes (Bezuidenhout, A & Jeppesen, S, 2011).
Considering a study made in Southern-Africa where 3 countries were studied- South Africa, Swaziland and Lesotho. South Africa and Swaziland had many tier 1 suppliers catering to higher end of South African market being subjected to codes. Difference between firms from South Africa and Swaziland was main how they integrate the Production network. Whereas in Lesotho’s firms had fewer differences. Majority of firms even those that seem to have better labour practices than other – put on an act for the benefit of inspectors, and expect workers to go along with these performances. As a result, workers’ understandings of inspections are tied up with these performances and they seem to internalise the logic of ‘putting your best foot forward’ (Bezuidenhout, A & Jeppesen, S, 2011).
In South Africa and Swaziland there was little awareness about the influence of such codes on working conditions. In Lesotho, there were highly public campaigns and workers were more aware of such codes. However, workers were not able to differentiate between Customers and inspectors. ‘This confusion would diminish the effectiveness of the instruments’ (Bezuidenhout, A & Jeppesen, S, 2011).
1.6 Challenges of CSR Implementation
Because of above exploitation of Labour rights and human rights of workers by the manufacturers, the brands have directly or indirectly profited. However, the scandalous working condition of sweatshops and many accidents have come back to haunt these brands and it hurts their reputation in the market. Many big brands have taken initiative to implement CSR strategies that focus on the compliance of Internationally recognized labour standards and labour laws. Over the past decade, it has especially been the large tier 1 firms that have been increasingly subjected to social auditing processes, CSR training programmes and multi- stakeholder initiatives. They in turn have adopted various strategies in response to these CSR initiatives (Merk J., 2014, p. 277-295).
Some companies reluctantly implement these programmes, some companies actively sought to mislead buyers, while others have preferred a more collaborative approach with their manufacturers, or lastly even adopted their own CSR strategies. The first group of companies get their companies passed though social audits which are considered a short-term test that they must pass to obtain a contract. To succeed they have honed the sophisticated art of “counter-compliance” (Hilton, 2005). The FLA (a monitoring initiative in which major brands like Nike and H&M are participants) survey found that 48% of the 122 suppliers operated double or triple bookkeeping records to mislead auditors (Vaughan-Whitehead, 2011, p. 10). Others deceive the auditors by maintain maintaining “Model Factor”, where auditors are received and it is made them believe that work is carried out at that location, whilst dispersing the bulk of production among other factories with poorer conditions (De Neve, 2009, p. 70). As we know the manufacturing sites are located in other countries, here the level of public scrutiny of the brand is very less in regard to the CSR issues when compared to the developed countries. There is also a goal gap between the Branding companies and the manufacturers. The role of Manufacturer/ producers suggest that they are “more concerned with managing costs than about public image”. While brands focus on consumers (i.e. image, reputation, etc (Chiu 2007, p. 444).
Some manufacturers might also assume that the implementation of ethical practices would make their costs run higher and make them less competitive, given “the costs incurred in improving social and environmental performance” (World Bank, 2003, p. 28)
For Labour and Human rights, there are certain standards (e.g. SA8000) available provided in the market which many companies have attained. Others join CSR Initiatives/Programs which appear more charitable to improve market image rather than focus primarily on the working conditions. These programs may vary from Community projects, women initiatives, education, Clean environment support etc. Companies who have implements only SA8000 is focusing mainly towards human rights and labor right standards leaving aside environmental issues. If a parent company has multiple suppliers, main company can get only few certified and portraying a SA8000 certified company will be misleading.