The Global Center for Workers’ Rights, in conjunction with Workers’ Rights Association, conducted a survey to understand the impact of Covid-19 on garment workers, particularly in Bangladesh. The report is titled “The impact of Covid-19 on workers and businesses at the bottom of the global apparel supply chain.”
This report is based on an online survey of Bangladesh from March 21 to March 25, 2020 Survey of domestic suppliers. There are approximately 2,000 suppliers and 4,000 factories in Bangladesh (many suppliers have multiple factories). Among them, 316 suppliers completed the survey.
Among the respondents, 15 are owners of small factories (250 or fewer workers) and 104 are owners of medium-sized factories (251 to 750 workers), and 197 had 751 or more workers. The majority of buyers from these suppliers (67.7%) are European, 15.8% are from the United States, 4.8% are from Asia, and the remainder are “other” or are made up of American, European and Asian companies.
The global Covid-19 pandemic has had a devastating impact on the global apparel supply chain, and the situation will get worse before it gets better.
In developed market economies, clothing stores closed due to lockdowns, demand for clothing fell, and brands and retailers moved quickly to cancel or postpone production orders – in many cases Next, they refused to pay for the clothing that the supplier had already produced. The result has been the partial or complete closure of thousands of factories in producing countries. As a result, millions of factory workers were sent home, often without legal wages or severance pay.
The research report reveals the devastating impact of canceled orders on businesses and workers. Crucially, it illustrates the extreme fragility of a system based on decades of buyers lowering the prices they pay suppliers: factories are closing, unpaid workers have no savings to survive the tough times ahead, and government taxes are so low that The ability to provide meaningful support to workers and industry is very limited.
Some findings
Since the outbreak of the coronavirus pandemic, more than Half of Bangladeshi suppliers have canceled a large proportion of products in production, or have completed production canceled (45.8% of suppliers reported that “a lot” were orders that they had almost completed or fully completed; 5.9% of orders All have been cancelled). This is despite the fact that the buyer is contractually obligated to pay for these orders. However, many people are skeptical of using a force majeure clause to justify a breach of contract terms.
After canceling the order, 72.1% of the buyers refused to pay the suppliers for the raw materials (fabrics, etc.) that had been purchased, and 91.3% of the buyers refused to pay the suppliers for the clothing processing costs (production cost) . Due to order cancellations and insufficient payments, 58% of factories surveyed said they had to shut down most or all operations.
More than one million garment workers in Bangladesh have been laid off or furloughed (temporarily suspended) due to canceled orders and buyers’ failure to pay cancellation fees. Suppliers in the survey reported that 98.1% of buyers refused to pay the legal requirement to pay part of their wages to furloughed workers. 72.4% of furloughed workers were sent home without pay. 97.3% of buyers refused to pay severance pay to laid-off workers, which is also Bangladesh’s legal right. 80.4% of laid off workers were sent home without severance pay. This is despite the fact that many brands have “responsible exit” policies in which they commit to supporting factories to mitigate the potential adverse effects on workers should they decide to exit.
The findings presented in this report paint the most comprehensive evidence yet of the depth of the crisis in Bangladesh. The basic dynamics presented here are evident among global apparel exporters.
Recommendations
All parties feel the consequences caused by Covid-19 A heavy burden. However, not all parties have the same ability to provide the liquidity required to pay for it. Retailers and brands have taken a huge hit to their profits and cash reserves as stores, specialty stores and malls close. But the blow to supplier factories, which typically operate on slim margins and has far less access to capital than customers, is more extreme.
The burden is enormous on workers who rarely earn enough to accumulate any savings while still needing to put food on the table as a priority and may be burdened with unforeseen Medical expenses.
Parties do their best to obtain loans and benefit from government bailouts in order to share these benefits in the supply chain. Buyers are required to respect the terms of their purchase contracts and pay suppliers for orders that have been produced or completed.
For their part, suppliers must ensure that payments received from these purchasers are used to pay all legally required wages and benefits, including severance pay to terminated workers.
The Bangladesh government must continue to mobilize all available resources to subsidize suppliers and provide wage support to all workers during the crisis.
Looking ahead, buyers should learn from this crisis and modify their purchasing behaviors to ensure appropriate social and environmental sustainability. These changes include order stability, enabling proper planning, prompt payment of orders, and full respect for workers’ rights. It also includes a costing model that covers all costs of social responsibility: The Living Wage��.
Conclusion
The responsible approach is for brands and retailers to Find ways to obtain lines of credit or other forms of government support to meet their obligations to supplier factories so that they can cover costs and pay workers to avoid furloughing millions of workers who have trouble eating, let alone paying Medical expenses. Going forward, there is a need to rethink how the industry conducts business. Procurement practices must be reformed to achieve social and environmental sustainability.
This includes stable orders, timely payments and pricing mechanisms that cover the total cost of sustainable production, from living wages and appropriate benefits to taxation, enabling governments to establish appropriate social safety net. It includes making workers’ participation an integral part of the process by fully respecting the rights to unionize and bargain collectively.
Major Buyer of Bangladeshi Clothing
Committed to Pay All Buyers who are in production or have completed orders:
H&M
Inditex
Kiabi
PVH (Deferred Payment)
Target (USA)
VF
Top buyers who have made no such commitments at the time of writing:
C&A
JCPenney
Kohl`s
LLP
Marks&Spencer
Mothercare
Primark
Tesco
Walmart
*Status is determined based on the brand’s public statements and/or communications with suppliers or authors. </p
