Unlike Rana Plaza, the fashion industry can’t pass the buck for the disaster that has befallen one million garment workers due to cancelled orders during Covid-19. Dr Nika Salvetti from Nyenrode Business University looks at how brands can help build a more sustainable industry in the wake of the pandemic.
While more and more companies are focused on sustainable entrepreneurship and the fair and inclusive economic growth of the global economy, there is still a trend in the ready-made garment industry of companies moving their production to new markets with lower production costs.
The largest, not necessarily the most sustainable, economic growth can be seen in Southeast Asia. The pressure on raw materials and essential natural resources is high and the burden on society is increasing.
This has been particularly true in the Bangladesh RMG industry, since such pressure provoked the fatal accidents at Tazreen Fashions and Rana Plaza in 2012 and 2013. The societal criticism was overwhelming, and resulted in a concerted international pressure of several stakeholders to improve socially and environmentally responsible behaviour along global supply chains.
The local culture of 'quick and easy' gains is supported by buyers' requirement that they squeeze the price of garment levels to the lowest level possible
However, the greatest attention was put on blaming the factory owners. Unsustainable practices were soon highlighted, especially in relation to safety of buildings, inadequate working conditions, and lack of attention on environment impacts. According to research I conducted for my PhD dissertation, this has been nurtured by the local culture of “quick and easy” gains, supported by buyers requirement that they squeeze the price of garment units to the lowest level possible to guarantee higher profit margins. But also, by the weak law enforcement that would not ensure compliance to laws and local regulations.
Consequently, suppliers tend to compete against each other to guarantee the target prices, often accepting orders at prices below their costs because of the urgency to satisfy their huge production capacity. That has been creating an asymmetric power relationship between buyers and suppliers, in favour of the buyers. As buyers are in a better power negotiation position, they tend to flex the muscles and take advantages in commercial terms. For instance, shifting consignments originally on a FOB (free on board) basis by sea to CIF (costs and freight) by air, to avoid paying for the freight costs.
These double standards and decoupling approaches had been creating mistrust between suppliers and buyers and undermined the opportunity of strengthening collaboration and cooperation in the name of sustainability.
My research shows that it is important to listen to the local voices and to look at the local context, in particular of those local business leaders who are striving to contribute to the improvement of the sector by, for example, implementing technological change, improving working conditions beyond what is established by the local law, redefining the power relationships with their buyers and by setting the examples for others to follow.
Companies tend to look from a western perspective and often forget to look at the local context, which could help them better understand the situation and bring about improvement.
With the coronavirus, the garment sector is once again put under stress and criticism. This time the blame is towards the buyers, as they have been neglecting to respect their commitments. In fact, most of them have been cancelling orders and postponing payments, imposing unfair commercial terms, such as air frights or imposition of discounts on garment unit price.
There should now be a collaborative effort by western brands to help build a sustainable and ethical fashion industry in Bangladesh
According to the president of Bangladesh Garment Manufacturer and Exporters Association, from March to May 2020, such tactics cost its 2,274 members almost $5bn, forcing 348 to shut their factories. And while 1,855 paid the workers for the month of May, others could not afford to pay either in May or April.
This has caused the loss of jobs for more than 1 million workers, who are now forced to survive the extreme difficult living conditions imposed by the coronavirus. (See also: ‘Millions of garment workers face destitution as fashion brands cancel orders’)
There should now be a collaborative effort by western brands to help build a sustainable and ethical fashion industry in Bangladesh. Buyers should, first of all, respect their commitment for all orders that have been produced and for the initial investment costs of raw materials and human resources; then seize opportunity to build a more sustainable and resilient supply chain.
Among others, brands could consider to:
Build up on the consumers’ sentiments and preferences on e-commerce and take advantage to build warehousing facilities in the main markets’ hubs and domestically, making use of the existing stocked amount of garment products;
Make the supply chain more transparent and efficient by investing in digitalised systems to better monitor the seasonal variation in production and track and trace practices along the supply chain;
Enable credit facilities for the suppliers to allow timely and full payment to the workers;
Establish a fund where both buyers, retailers and suppliers contribute to support those workers affected by the virus;
Strengthen the collaboration with key suppliers in order to improve purchasing practices so that it would reinforce an entire supplier ecosystem for greater resilience in the future;
Elaborate a new type of costing to internalise the externalities produced along the supply chain.
Coronavirus has put once again the garment sector of Bangladesh under stress. Recovering from it by co-responsibly addressing the commitments to society and the environment, by keeping alive and healthy the human power of the sector, will inevitably strengthen the resilience of the sector and recuperate its winning position as soon as the crisis is over.
Dr Nika Salvetti is PhD research fellow at Nyenrode Business University in the Netherlands.