What is the True Cost of Sustainable Apparel from Bangladesh? Insights from Harvard "Sustainable Models for the Apparel Industry" Conference

This week’s blog is a guest blog from a PhD Student, MD Rejaul Hasan.  Rejaul is from Bangladesh, and is working on his PhD in the College of Textiles at NC State University, and is passionate on the subject of sustainable apparel from his home country.  This week he provided a great set of summaries from the Harvard Conference on “Sustainable Models for the Apparel Industry” held on September 24 at the Harvard Law School.  The issues provide a great backdrop for the analysis of a “should cost” model to truly understand what is a fair price for apparel, in a sustainable supply chain.

What is the fair price of an apparel product responsibly sourced from Bangladesh, and what price do apparel suppliers need to ensure a safe and sustainable work place and fair wages for the workers in Bangladesh? Are big name brands really paying a fair price to a supplier in Bangladesh? What are the major facts inhibiting the Bangladesh apparel industry in being safe and sustainable? Are the major factory accidents in Bangladesh linked to the lower price paid by the brands to Bangladeshi supplier? Who is making the bulk of profit in the apparel supply chain? These are some of many discussions on building a “Sustainable Model for the Apparel Industry” that occurred at the Bangladesh Development Conference 2016 on September 24 at Harvard Law School.

All the major apparel industry stakeholders across the world participated in the conference including representatives from U.S. retailers, U.S. State Department, EU, Bangladesh Government, Bangladesh garments business association, Bangladesh suppliers, US Embassy Bangladesh, World Bank, Netherland Ministry of Foreign Affairs, International Labor Organization, Solidarity Centre, Worker Rights Consortium, Cotton Incorporated, Better Buying, South Asia Water Advisory, Ethical Trading Initiative, Harvard Business School, and Penn State University.

Bangladesh is the second largest exporter of apparel and textile after China with $28 billion in exports last year. It directly employs 4 million workers, 80% of them are women; the industry is playing a vital role in the country’s huge economic development and women empowerment since early 80s. Though the incidents of “Rana Plaza” and “Tazrin Fashion” in 2012-13 attracted the world’s negative attention and showed still how vulnerable Bangladesh is in terms of work place safety and labor rights, it remains the most desired sourcing destination for major apparel brands and retailers in US and EU.

During the Conference, Prof. Ross from Clark University mentioned the recent “Tempaco” factory fire in Bangladesh that caused the death of more than 30 workers. He supports the US government decision of not assignment duty free access as a GSP facility for apparel exported to the US. He mentioned that until such time as Bangladesh ensures major improvements in factory safety, this GSP facility should not be assigned and the EU should also ban this duty free access. Regarding the GSP facility, Evan Fox, the Political Officer in US embassy at Bangladesh explained how they are working with Bangladesh Industry to build a 16-point action plan and execution to support the Bangladesh industry to get GSP facility assignment as soon as possible.

Regarding factory safety, suppliers and business associations leaders from Bangladesh claimed that every year the price of product is going down with an increase in requirements for more advanced product design, quality and overall sustainability requirements from the brands and retailers. This is a major challenge for suppliers to improve factory safety as fast as expected. In support of that, Prof. Mark Anner from Penn State university showed how the US apparel import price went down in the last 20 years and the correlation between import price and the labor rights situation of exporting countries was very high. Suppliers from Bangladesh also mentioned how accord and alliances are inspecting a huge number of factories and making corrective action plans, which is causing labor wages increase and more recent environmental initiatives by governments and suppliers in Bangladesh.

Liana Foxvog from ILO shared a study mentioning how female workers getting harassed by co-workers or supervisors was prevalent, and that a lack of effective monitoring systems by the factory and labor unions in Bangladesh is problematic. In 2010 to 2016 the Bangladesh Joint Directorate of Labor (JDL) approved 362 labor unions against 783 registration applications. Tim Ryan, Asia Regional Program Director from the Solidarity Center added and reinforced the necessity of labor unions in preserving labor rights.

Representative from retailers mentioned the increasing competition in retail and how the industry is really struggling to survive. Consumer expectations for having the most fashionable apparels are the lowest price possible, consumer lack of interest of paying high prices for sustainable product, challenges from competitors and increases in production cost in Asia is putting the whole apparel retail industry in survival mode. Many brands and retailers already modified their product to adjust for price competition but are struggling to stay competitive. However, a report in the Sourcing Journal on 8 Aug 2016 “Cheap Clothing Created Some of the World’s Richest People” mentioned how owners of major apparel brands and retailers became billionaires through the apparel business. This remains a matter of heated discussion and arguments arise around who is making most of the money in the apparel supply chain: the consumers, the brands and retailers or the suppliers.

The ultimate question that arises is what is the standard price or minimum price of any product sustainably sourced from Bangladesh? Suppliers from Bangladesh also emphasize that having such standards would provide an industrywide benchmark. This could probably justify the claim whether brands and retailers are really paying lower prices to suppliers than necessary to ensure a safe work environment, fair wages and overall sustainability of the supply chain. At the same time, it is important to examine whether factory fires or compliance violations in Bangladesh are really linked to price issues. It is really that expensive to ensure a safe work place? For instance, the Rana Plaza, Tazrin Fashion and recent Tempaco factory fire seem less linked to low prices as opposed to compliance with regulations, monitoring, a sustainability culture and of course ethical sourcing practices of top brands and retailers.

A big question in everyone’s mind at the conference is if the price goes up, whether Bangladesh will survive and be able to compete against strong competitors such as India, Pakistan, Sri Lanka, Vietnam and Cambodia. Yevgeniya Savchenko, an economist from the World Bank mentioned how apparel manufacturing is going to move from China to South Asia because of high prices from China and the question is who is best able to seize market share. clearly Bangladesh is ahead of any competitors in terms of apparel export business growth (8.11% growth last year, the highest in the world). But it will be key for Bangladeshi manufacturers to improve every stage of the manufacturing and supply chain to not only improve cost but also to build a sustainable industry that will grow in the long-term.