After the fatal 2013 collapse of the Rana Plaza building in Bangladesh, multistakeholder initiatives were created to improve the labour conditions in the global garment supply chain. However, the financial burden of improvements is not shared equally between multinational clothing companies and local suppliers. Cedric Dawkins and Enrico Fontana write that these initiatives must involve meaningful dialogue between stakeholders, ensuring that the costs of corporate social responsibility are shared equitably.
The 2013 collapse of the Rana Plaza building in Dhaka, Bangladesh is a watershed in the history of the global supply chain that feeds the garment industry. With 1134 people dead and 2500 injured, it was no longer possible to hide the precarious conditions to which thousands of workers had to submit.
In the wake of the disaster, the global apparel firms responded to widespread outrage by establishing multistakeholder initiatives like the Bangladesh Accord for Worker and Fire Safety and the Alliance for Worker Safety in Bangladesh. These initiatives aimed to enforce global standards and oversight for garment factory safety. However, the perspective of local factory owners, who are at the intersection of global policy mandates and local realities, reveals a contested landscape of corporate social responsibility in global supply chains.
Multistakeholder initiatives are often hailed as effective vehicles for corporate social responsibility that assure the legitimate oversight and accountability of large multinational firms. However, local factory owners, such as those in Bangladesh, often feel that safety initiatives like Accord and the Alliance have significantly improved safety standards, but the financial burden of these improvements is not shared equally. Global apparel firms, which wield considerable power, continue to press for lower garment prices, leaving local owners overmatched in the relationship.
Factory owners’ association
The Bangladesh Garment Manufacturers and Exporters Association is a powerful entity representing approximately 4500 member factories. It plays a crucial role in local governance, wielding a regulatory-type authority despite being a private organisation. The factory owners association enforces uniform wage policies among its members to prevent conflicts among its members and maintain Bangladesh’s competitive edge in the global market.
It also provides vital support to its members, from handling labour disputes to managing interactions with local authorities. This facilitation is essential for factory owners to navigate the complex regulatory landscape and maintain operational stability. However, the support comes at a price, perpetuating a system where a few politically connected leaders hold significant power. Factory owners must adhere to association standards, or risk severe repercussions, even losing their export certificates.
The power of apparel firms
Global apparel firms maintain a dominant position in their supply chains, leveraging that advantage to enforce compliance with safety standards, but keeping production costs low. Factory owners must meet these standards to secure contracts, yet the prices paid for garments do not reflect the increased costs of compliance. This discrepancy creates significant financial strain for local factory owners, who believe they must invest in safety upgrades without adequate compensation from buyers.
Moreover, global firms use subtle forms of pressure to maintain their advantage. Promises of larger orders and quicker payments are used to pacify factory owners, who hope to recoup their investments through increased volume. Notwithstanding, these non-price concessions do not address the fundamental issue of low prices paid for garments, which directly impacts wage levels and working conditions.
Contested governance
When the Accord and the Alliance expired in 2018, the factory owners association took steps to assert local governance and challenged the need for continued external oversight. Their resistance to extending the Accord and the Alliance reflects a broader struggle over control and legitimacy in global governance initiatives. Local factory owners argued that the global standards imposed upon them were more about maintaining the appearance of responsibility than addressing the root cause of safety lapses — aggressive pricing structures.
Both local factory owners and global buyers recognised that low-cost labour in Bangladesh was the basis of their partnership. The factory owners association, while not pushing for dramatic changes in wages or working conditions, sought a larger share of profits from the global apparel firms.
Following legal actions in Bangladesh and international criticism and concerns about worker safety, the global apparel firms and local factory owners developed a hybrid oversight structure, the International Accord. Signed in 2021, this agreement attempts to balance global safety standards with local authority, allowing the factory owners association to maintain control over safety inspections while global firms continue under a new version of the Accord.
The new middle ground
The new oversight initiative represents strategic concessions from both sides, aiming to stabilise the contentious relationship between global buyers and local suppliers. As a hybrid governance structure, the International Accord retains global oversight mechanisms while empowering local factory owners to enforce standards in their home country.
The interaction between local factory owners and global apparel firms exemplifies contested notions of corporate social responsibility and governance in global supply chain. Neither the local factory owners nor the global apparel firms oppose improving safety standards; rather, they contest the distribution of costs and benefits within their partnership.
Rubana Huq, past president of the Bangladesh garment factory owners’ association characterises the difficulty:
We live in different worlds: one where regulations are handed over to us, and another one that regulates. There’s a distinct disconnect. . . If you really want a level playing field, both worlds need to converge and be broadly inclusive. While a legislation is being framed, it is imperative that the countries who are expected to comply be taken into consideration.
- – Statement at the Organisation for Economic Cooperation and Development Forum on the ready-made garment industry in February 2022.
To address this challenge, there is a need for oversight initiatives that effectively balance global and local interests. These initiatives should involve meaningful dialogue between all stakeholders, ensuring that the costs of corporate social responsibility are shared more equitably. The emergence of the International Accord, a hybrid governance model, attempts to meld and respect the priorities and standing of local factory owners while upholding global safety standards.
Conclusion
The case of the Bangladesh garment industry highlights the complexities and conflicts inherent in global supply chain governance. For corporate social responsibility initiatives to be truly effective, they must go beyond rhetoric and address the realities faced by local suppliers and their workers. Policymakers and business leaders must work towards a more equitable distribution of responsibilities and benefits, fostering a collaborative approach that ensures the sustainability and fairness of global supply chains.
By recognising and integrating the perspectives of local factory owners, we can move towards a more just and effective model of corporate social responsibility, where the promise of safer working conditions does not come at the expense of those who are least able to bear the costs. The future of corporate social responsibility in the Bangladesh garment industry depends on creating a balanced and inclusive governance framework that eliminates undue price pressures on factory owners that results in cutting corners and placing workers at risk.
- This blog post is based on Contesting corporate responsibility in the Bangladesh garment industry: The local factory owner perspective, in Human Relations.
- The post represents the views of the author(s), not the position of LSE Business Review or the London School of Economics and Political Science.
- Featured image provided by Shutterstock
- When you leave a comment, you’re agreeing to our Comment Policy.
Print Friendly
