Report

Laundering the Global Garment Industry’s Dirty Business

Two years after Bangladesh's Rana Plaza disaster, experts say a dense network of little-known agents and subcontractors is still getting in the way of better work conditions.

rana

From time to time, activists concerned about abuses in the global garment industry stage protests in front of gleaming department stores in New York, Paris, and London. They’ve even entered clothing outlets across Europe and pretended to faint from overwork in a show of solidarity with exhausted workers in Asia. Those workers themselves protest loudly and often for better conditions, blocking roads with burning tires near sprawling, dingy factories on the outskirts of Dhaka or Phnom Penh, and sometimes falling to bullets fired by riot police dispatched to return them to work.

Between those two ends of the global garment supply chain, though, most attempts at accountability fall away. Linking the dusty Asian factories to the big, bright shops of Europe and North America is a convoluted network of contractors, subcontractors, and sub-subcontractors with little-known names, based in China, Taiwan, Hong Kong, or South Korea — and in small, unmarked buildings in the poorer countries that produce the clothes. These middlemen are often located far away from both desperate factory workers and outraged activists, and they’re low-profile enough to escape the international scrutiny given to a Walmart or a Gap.

Such scrutiny of brands escalated dramatically after the collapse of the Rana Plaza factory in Bangladesh that killed more than 1,100 garment workers two years ago Friday. Considered the worst disaster of its kind ever, the eight-story building’s massive cave-in also left thousands injured under the rubble — and it could have been prevented. Ahead of the collapse, factory supervisors forced frightened employees to keep working despite large cracks in the shoddy structure’s facade.

Investigations soon linked the factory to several major retailers, including Primark, Walmart, and Benetton, and the tragedy has forced the whole industry to shape up on safety. Two major initiatives in Bangladesh, signed by more than 200 international garment companies, have now inspected thousands of Bangladeshi factories and ordered hundreds to restructure and rebuild to meet basic safety standards. In Bangladesh, as well as countries like Cambodia, Vietnam, and Indonesia, schemes like the International Labour Organization’s Better Work program tout their successes at improving conditions more broadly.

But safety issues and worker abuses continue across Asia, with ongoing reports of workers exposed to toxic chemicals, forced to labor whole days without taking any breaks, or beaten when they try to form unions. And a large part of the reason these abuses continue, experts say, is the complex role of middlemen and sub-contractors, which makes it hard to know which brands’ clothes come from which factories.

“This aspect of the industry is incredibly opaque,” said Scott Nova, executive director of the Worker Rights Consortium, a labor advocacy group that monitors factory conditions around the world. “These firms do not advertise themselves publicly.”

Through the industry’s messy routing networks, a single factory in South or Southeast Asia could produce clothes for more than a dozen different brands based in different countries in Europe and North America. A range of wholesalers, trading companies, and agents dip into different parts of the business. Some focus solely on the logistics of connecting factories to brands; others, like Hong Kong-based giant Li & Fung, also run their own factories and retail operations.

It’s difficult for anyone to get a picture of the full supply chain. Some people have held up Cambodia as a garment industry model for accountability due to its Better Factories inspection program run by the International Labour Organization. But as a Human Rights Watch investigation revealed in March, Cambodian workers often don’t know what brands they’re making clothes for, or only find out if they happen to be tasked with sewing on labels. Workers frequently launch protests against foreign middlemen with names that sound like afterthoughts lost in translation — Pine Great, Long Bright, Sky Nice International Co. Every now and then, these companies’ owners go bankrupt and disappear, perhaps back overseas, leaving workers without any compensation or means to confront their former employers.

In Bangladesh, the world’s second largest garment exporter after China, the intermediary companies’ slice of the supply chain is so murky that their names have tended to become known publicly only after a major disaster prompts an investigation. After more than 100 people died in a fire while locked inside Dhaka’s Tazreen Fashion factory in 2012, Walmart first denied that any of its clothes came from the factory. It then said its agents had contracted with the factory without its authorization. Eventually, investigations turned up about ten different middlemen, “several of whom we had never previously heard of,” said Nova. “And the only reason those names emerged is that they appeared on documents that were found in the ashes in the factory.”

Brands say that since Rana Plaza, they’ve tried to crack down on unauthorized subcontracting and get a clearer picture of just who is actually making their clothes. Marilee McInnis, Walmart’s director of international corporate affairs, told Foreign Policy that under current policies, the company must approve all manufacturers, because unauthorized contractors can “make it difficult to audit and confirm our suppliers are adhering to the standards we insist are upheld.” H&M spokesperson Anna Eriksson said that when her company finds an underground operation, it asks the supplier to present a plan to correct the problem or risk losing its contract.

But many observers say brands aren’t nearly proactive enough in looking for violations. A report released by New York University’s Stern School of Business a year after Rana Plaza found orders coming “through purchasing agents and in a manner that is not transparent to buyers or regulators,” and that the brand-led initiatives launched after Rana Plaza “fail to address the greatest risks of this system.”

The contracting companies say they have a right to protect sourcing information that gives them an edge in linking global brands to local manufacturers. Workers’ advocates, however, argue that brands use this murkiness in the supply chain as an excuse to pass the buck across Asia. “They use middle agents basically to distance themselves from their sourcing agency,” said Samantha Maher, a policy director for Labour Behind the Label, a U.K.-based worker rights group. Retailers usually prefer not to talk about these extra steps in the process. It’s only when they’re embarrassed by a major factory violation, said Nova, that “all of a sudden we find out that there are supposedly multiple layers between the brands and the factory.”

Groups like Nova’s and Maher’s say these extra layers shouldn’t mean brands aren’t responsible for work standards across their whole supply chains, as no one’s forcing them to work through middlemen. But the twisting and turning network of contracts continues to be a headache for both companies and enforcers to track, and most advocacy groups and international organizations feel they can get more done by focusing on naming and shaming the big European and American retailers than mapping the shadowy web of agents that supply them. ILO senior communications officer Steve Needham told Foreign Policy that “at this point, we are not focusing further down the supply chain” past the brands.

After the shock of Rana Plaza, pressure on brands has led to real steps to improve at least basic safety standards. In the months after the disaster, a large coalition of mostly European retailers like H&M and Adidas, along with a few international trade unions and NGOs, signed the Bangladesh Accord on Fire and Building Safety. The Alliance for Bangladesh Worker Safety, an alternative promoted by retailers like Walmart and Gap, attracted mainly American companies. These initiatives, along with a smaller government program, have now completed inspections of about 3,000 of the nearly 4,000 export factories in Bangladesh.

Their next task will be much more difficult: ensuring that factories actually make the improvements they’ve ordered, from repairing faulty electrical outlets to strengthening columns and building functional fire escapes. In practice, these costs often fall on factories rather than the brands who — in theory — say they’re accountable. It’s not clear if institutions in Bangladesh, where powerful business interests have encouraged brutal attacks on union organizers, will be able to keep up standards when the two initiatives’ five-year mandates run out in 2018. Bangladesh’s Department of Inspections of Factories and Establishments and the Bangladesh Garment Manufacturers and Exporters Association didn’t respond to requests for comment for this article.

Advocates, meanwhile, fault the programs for focusing only on safety, leaving aside other workers’ concerns, like a living wage, benefits, and the ability to unionize. Workers who spend most of their waking hours in hot, windowless workrooms are still struggling for improvements in those areas not just in Bangladesh, but also in countries like Indonesia, Cambodia, Vietnam, Myanmar, India, and Pakistan.

Another failing, say worker groups, is that neither initiative publicly discloses which brands source clothing from which specific factories, meaning that it continues to be hard for outsiders to get a clear picture of the whole industry. Still, officials from the Accord and Alliance say their programs have at least forced companies to learn more about their own supply chains — and just how worryingly complicated some of them are.

“We did see some brands quite surprised themselves to see they were working with quite so many factories in Bangladesh,” said Joris Oldenziel, head of public affairs and stakeholder engagement for the Accord. That realization might encourage brands to simplify their supply chains and build longer-term relationships with fewer companies, he said. Ian Spaulding, senior advisor to the Alliance, said that program’s member agreement requires companies to adjust the way they source goods “to ensure they are working with an approved group of factories and taking tangible measures to prevent unauthorized subcontracting.”

It’s far from clear if those principles always hold up in practice. One encouraging sign, though, is that some middlemen have joined brands in supporting the new safety initiatives. Li & Fung, the multi-billion-dollar Hong Kong-based Walmart of middlemen, for example, is a party to the Alliance and says it supports the Accord. Ten years ago, the company was basically anonymous to all except industry insiders, like the legions of other suppliers and agents in the submerged middle stretch of the industry’s supply chain. But over the decade, its size and publicized links to disastrously unsafe factories like Tazreen forced it to work on its image. The company, which didn’t respond to requests for comment for this article, now has a user-friendly website and has launched its own safety consulting service.

Not everyone is sold on Li & Fung’s good aims. Nova argued that the company’s moves to enforce safety standards — like those of other suppliers — probably go just far enough to keep it from losing the business of buyers facing greater scrutiny after Rana Plaza. The Hong Kong firm, however, has been more willing to pay compensation to the families of factory disaster victims than some brands.

Li & Fung is a unique case because it dwarfs most other middlemen. But as organizations intent on avoiding another Rana Plaza continue to sort through once-impenetrable parts of the industry, they hope that eventually other contracting companies, too, will have to step up.

MUNIR UZ ZAMAN/AFP/Getty Images

Justine Drennan was a fellow at Foreign Policy. She previously reported from Cambodia for the Associated Press and other outlets. @jkdrennan

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