Sub-contracting root cause of safety risks in BD RMG

Indirect sourcing, a non-transparent practice of sub-contracting, is the root cause of safety risks and poor working conditions in readymade garment (RMG) sector in Bangladesh, a study reveals.
Additionally, the two major remedial plans, launched last year by the Accord and the Alliance, have failed to address the risk factors caused by indirect sourcing, it said.
Though indirect sourcing has helped invigorate the garment industry and Bangladesh's economy, global brands doing business in Bangladesh need to assess the overall condition of factories and address the most urgent risks, the report added.
The New York University Stern Center for Business and Human Rights released its report one year after the most deadly industrial accident in modern manufacturing -- Rana Plaza - titled, "Business as usual is not an option: Supply chains and sourcing after Rana Plaza".
The report examines a range of measures undertaken last year, none of which has yet addressed the fundamental problems facing the garment industry.
The report is based on a year-long effort that included two fact-finding missions to Dhaka in July 2013 and February 2014 and a meeting in New York in September last year, attended by the key players from across the garment sector including Bangladeshi manufacturers and global brands.
The centre also interviewed more than 100 people about business practices in the supply chain.
The Centre will convene a closed-door summit in Dhaka from April 27-29 and will invite global brands, local manufacturers, government officials, civil society groups, unions, and international donors to consider the findings of the study and discuss an action agenda for addressing the underlying problems in factory safety and workers' rights.
"Indirect sourcing has become an essential feature of the garment sector in Bangladesh as a means of increasing margins and boosting production while keeping costs low," said Sarah Labowitz, co-director of the center and the co-author of the report.
"In the absence of regulation by the government of Bangladesh, the prevalence of indirect sourcing has resulted in a supply chain driven by the pursuit of lowest nominal costs. That means that factories receiving subcontracts are operating on razor-thin margins that leave concerns about safety and workers' rights perpetually unaddressed."
The centre found that the two major remedial plans launched last year, Accord and the Alliance, failed to address the risks caused by indirect sourcing.
The two initiatives focus on monitoring less than 2,000 factories, while the total number of factories and facilities producing for the export garment sector is likely between 5,000 and 6,000.
"The worst factory conditions are largely in the factories and facilities that fall outside the scope of these initiatives. "People across the sector recognize that Bangladesh's sustained development depends on the garment sector, including through the continued investment of global buyers," said Michael Posner, co-director of the centre and the former assistant secretary of State for democracy, human rights and labour.
"We share the goal expressed by many people of ensuring that 'Made in Bangladesh' is a sign of pride for workers, business and consumers. That's why global retailers and their first-tier manufacturing partners need to recalibrate their business relationships to prioritize transparency and longer-term sourcing commitments, he added."
NYU Stern's recommendations call for companies across the sector -- global buyers and national-level suppliers -- to join forces to create a single, unified fund for building repairs, safety upgrades and remediation.
The report presents a forward-looking agenda, starting with a collective effort to determine how many factories -- big and small, registered and unregistered -- participate in garment manufacturing for the export market. Together with the government of Bangladesh, global brands, trade associations and leading Bangladeshi exporters should compile and publish a single, comprehensive list of all factories and facilities, which should be updated periodically.
"Bringing second and third tier factories into the open will make workers safer and help prevent future deadly industrial accidents," said Labowitz. "Enhancing oversight of subcontracting facilities is a long-term project, but the first step is to acknowledge the true scope of the problem," he said.
The report calls on the international community -- foreign governments, the World Bank and other intergovernmental organisations -- to convene a major donors' conference on factory safety and critical infrastructure in Bangladesh.
In the absence of such funds, the report warns, "We are destined to see recurring tragedies in Bangladesh."
Meanwhile, partially admitting the study report, country's apparel makers said sub-contracting is not the sole risk factor and there are a few more.
According to them, factories especially small and medium ones are not adequately compliant so they have no other options but to depend on indirect sourcing business.
"The subcontracting is still a reality in our apparel sector as many of the local readymade garment manufacturing units are not capable enough to do business directly with foreign buyers," Abdus Salam Murshedy, former president of BGMEA told the FE.