On April 24, 2013, a multi-storey garment factory complex in Bangladesh called Rana Plaza collapsed. killing more than 1,000 workers and injured another 2,500. It remains the worst accident in the history of the garment industry and one of the deadliest industrial accidents in the world.
Several factories within the complex produced clothing for western brands, including Benetton, Primark and Walmart, shine the spotlight on the unsafe conditions in which a significant portion of Americans’ cheap clothing is produced. Humanitarian tragedy struck as shoppers from wealthy countries grappled with their own complicity and called for reform — but a decade later, progress is still patchy.
If professor of operations and supply chain managementI think it’s important to understand how the complex and fragmented supply chains that are the norm in the apparel industry create conditions where insecurity and abuse can thrive – and make it difficult to assign responsibility for reform.
Ashamed to action?
Rana Plaza was not the first accident in Bangladesh’s garment industry. While the government had strict building codes “on the books”, they were rarely enforced. Most workers lacked the information and power to demand safe working conditions.
But the fact that the collapse of Rana Plaza was not only a humanitarian crisis, but also a public relations crisis, prompted swift action by international organizations and Western brands and clothing retailers. A campaign for full and fair compensation for families of victims was launched immediately, powered by the International Labor Organization, a UN agency. Within a few months, two initiatives were designed to bring garment factories in Bangladesh up to international standards: the European leadership Agreement for fire and construction safetyand the American-led Bangladesh Occupational Safety Alliance.
While the two initiatives differed in a number of key areas, they both shared the same goal: to improve construction and fire safety by leveraging the purchasing power of the member companies. In other words, Western brands would insist that production partners meet the standard or do business elsewhere.
In total, the two agreements covered approximately 2,300 supplier factories. The coalitions conducted factory inspections to identify structural and electrical deficiencies and developed plans for factories to make improvements. The initiatives also laid the groundwork for the establishment of worker safety committees and to train workers to recognise, resolve and prevent health and safety problems. Member companies reserve money for inspections and training of employees, negotiated commercial terms And facilitated cheap loans for factory improvements.
Both were five-year agreements: the Alliance was phased out in 2018while the Accord operated for a few more years before handing over operations to the locally created Ready-made Sustainability Council in June 2020.
The record since
However, the responsibility and expense of making these improvements fell largely on the suppliers – a significant financial burden for many factories, especially given the low cost and small profit margins of the clothing they produced.
Under the Alliance and the Accord, thousands of factories were inspected for building and fire safety, identifying problems such as the lack of fire extinguishers and sprinkler systems, improper emergency exits, faulty wiring and structural problems. Both initiatives reported this after five years 85%-88% of security issues were resolved. About half of the factories completed more than 90% of the initial cleanup, while more than 260 of the original 2,300 factories covered by the initiatives were banned from contracting with member companies.
In addition, more than 5,000 beneficiaries, including injured workers and survivors of victims, were compensated through the Rana Plaza schemereceived an average of about $6,500.
All in all, I believe that these initiatives have succeeded in bringing security issues to the forefront. However, while considerable progress has been made in terms of infrastructure improvements, much remains to be done; for example, the initiatives just about fell under one third of all garment factories in Bangladesh. Importantly, neither addressed the company’s purchasing practices.
Clothes yesterday and today
To understand why so much clothing production takes place in substandard conditions, we need to understand the underlying economic forces: extensive outsourcing to low-wage countries to meet the demand for more – and cheaper – clothing to sell to customers in the West.
In the 1960s, the average American family spent 10% of his income on clothing, bought 25 pieces of clothing – almost all made in the United States. Fifty years later, around the time of the Rana Plaza disaster, the average household spent only about 3.5% of its income on clothing, but bought three times as many items, 98% of which were imported.
During these decades, low-income countries in Asia and Latin America began to produce more clothing and textiles. Clothing production is labour-intensive, meaning that the lower wages in these countries created a huge pull for brands and retailers, who gradually began to shift their sourcing.
On a $30 shirt, for example, a typical store markup is close to 60%. The factory makes a profit of $1.15 and the worker barely earns 18 cents. If a similar shirt were produced in the US, so would the labor costs be closer to $10.
As labor costs rose in China, so did Bangladesh a very attractive alternative. Clothing exports now account for 82% of the country’s total exportsand industry employs 4 million peopleof which about 58% are female.
The growth of this sector has reduced poverty significantly and also powerful women. However, to meet the rapid growth of the clothing industry, many buildings were converted into factories as quickly as possible, often without the required permits.
Everyone and nobody
A common way foreign companies source products from low-wage countries like Bangladesh is through intermediaries or agents. For example, when a brand places a large order with an authorized factory, the factory in turn is allowed outsource part of production to smaller factoriesoften without informing the brand.
This highly competitive environment, with people looking for the lowest price every step of the way and no guarantee of long-term relationships, gives suppliers incentives to cut corners – especially when they are under extreme pressure to deliver on time. This can translate into exploitative labor practices or unsafe conditions that violate local laws, but enforcement capacity is weak.
In their constant search for lower prices, buyers may turn a blind eye to these practices. The opacity of the supply chain, especially when brands do not source directly, makes it difficult to investigate and remedy these practices. International since the 1990s control of working conditions has grown, but reform efforts largely ignored construction and fire safety, the main reason for the collapse of Rana Plaza. Because multiple buyers often used the same factory, no buyer felt obligated to invest in the supplier to ensure better terms.
Garments traverse a complex global delivery network by the time they reach stores thousands of miles away. Workers are trapped in this web, exploited by factory management who are also rarely held accountable by governments unwilling or unable to enforce laws. Western brands are escaping their governments’ control by outsourcing production to low-wage countries and getting rid of direct responsibility. And consumers, eager to buy, shop for the lowest price.
This complex system makes it difficult to assign ethical responsibility, because everyone, and therefore no one, is guilty.