“The system is intentionally designed to not only outsource production, but to outsource responsibility…” Dara O’Rourke on global supply chains

Dr Dara O’Rourke has spent the last two decades researching the environmental, social and health impacts of global production systems. His research has evolved to include the study of governmental and non-governmental strategies for monitoring and accountability and new models of public participation in environmental and labor policy. He is currently Associate Professor of Environmental and Labor Policy at the University of California at Berkeley and is the founder of GoodGuide, the world’s largest database on safe, healthy, green, and ethical products based on scientific ratings. Dr O’Rourke has published three books, and several academic articles, including the award-winning Community-Driven Regulation (MIT Press, 2004). His newest book is titled Shopping for Good

In this interview with Boston Global Forum (BGF), Dr O’Rourke discusses loopholes in factory monitoring processes, the role of subcontractors and the development and impact of GoodGuide.

Credit-www.daraorourke.comCredit-www.daraorourke.com

 BGF: When did you first realize that labor monitoring in global supply chains was an issue that needed addressing?

Dr O’Rourke: I was doing work in factories in Southeast Asia in the early 1990s but I focused more on environmental issues at that time. I worked for the UNEP in Bangkok and for my PhD dissertation I studied factories in Vietnam, starting in 1994. In 1996, I researched ten factories in Vietnam one of which was producing shoes for Nike. I conducted a waste audit technocratic environmental assessment of the factory’s conditions and found very poor environmental conditions but also discovered very poor work place environment conditions. During my research, Nike had hired Ernst & Young (EY) to audit their factories and, in addition to what we found, EY had documented that two-thirds of the women had respiratory illnesses, massive violations of overtime laws, alleged rapes of women in the factories and other horrendous kinds of physical and verbal abuse.

I spent several months interacting with Nike trying to get them to take these problems seriously but they didn’t. I ended up writing a report on the conditions in these factories which was published in The New York Times in 1997. That is what pulled me from doing technical research to being engaged in broader public debates about work place conditions. I started looking not only into technical issues about air quality within factories and chemicals and toxics used in production but broader labor rights and human rights issues. I’ve done research in the last 15 years inside factories that make global brands of footwear, apparel, toys, electronics, chemicals and processed food and have focused increasingly on interdisciplinary work that looks at the full environmental, social and health impacts of production systems. I moved from technical questions of what chemical or solvent in the shoe causes a respiratory ailment to how you can change systems of governance of these global supply chains to prevent toxics, prevent sweatshops and prevent worker abuse. I conduct research and interact with governments, NGOs, unions and companies on new governance strategies to try and improve conditions in these global supply chains.

BGF: Even with monitoring processes and audits on the ground, why have situations not improved in the last 20 years? What has prevented progressive change from taking place in factories?

Dr O’Rourke: This is the sad part, and it’s mentioned in The New York Times article that we see the same problem surfacing over and over again. It feels like I give the same interview every year or so on the failures of global regulatory systems and the failures of monitoring systems. They continue to not find the problems in these factories or they continue to not solve the problems in these factories.

In the case of Bangladesh and the current global apparel industry, I think they monitor only symptoms of problems in the industry. For example, a checklist audit can observe people working beyond legal limits so they document overtime violations or they document accident and injury rates. The monitoring process is able to identify those symptoms of problems. Our work is to find out how to go from that symptom to a root cause of a problem and answer questions like: why are these accidents occurring and when are they occurring? If they’re occurring between 12am-4am, why are the workers working at that hour? In response, factory managers may say that the order came in late from New York or San Francisco, and they had to work overnight cause the contract said that if they miss the deadline, they would have eat all the material cost and could go bankrupt. By looking deeper, you start going from the accident rate to the overtime to the real cause- which is actually a contract that specifies a delivery time, a speed of operation and a price point that drives the factory to cut costs, work laborers long hours at low pay and eliminate safety procedures. And as you dig further down into the system, I would say the real root cause is the system of fast fashion which consistently drives down prices, speeds up delivery time, increases style changes and puts pressure on the whole system downward, including on the monitoring system where you’ve got a commodity-business of checklist auditing in factories that can’t take the time to progress from symptoms to root causes to solutions for those root causes.

There is a lot of blame to go around in Bangladesh from inspectors to factory managers to corrupt government officials to the parliament itself but there’s a lot of blame in the hands of the US retailers that are specifying, through their contracts, production pricing and delivery times which I think are the root cause of why workers walked back into Rana Plaza on April 24th. Their factory managers knew that if they did not complete those orders, they could go bankrupt. The workers knew that if they did not walk back into the factory, they could lose their job. This is where I think the monitoring systems miss the root cause and focus on symptoms, and at best identify problems. But they’re almost never solve these problems.

BGF: In almost every media report, the subcontractors get blamed from both the demand and the supply end. What’s the role of subcontractors?

Dr O’Rourke: The whole system of global apparel is organized in a fashion such that due to the fast fashion industry, the people who cut the deal are not the same as the people who produce the goods.  The deal is cut by big middle organizations, like Li & Fung, but often they are smaller contract or job houses that find factories to produce the goods. What we see repeatedly is that in the day after a catastrophe all the global brands and retailers are scrambling to find out if they have products being produced in those factories. The system is intentionally designed to not only outsource production, but to outsource responsibility for hiring workers, managing the supply chains and dealing with inventory. To meet delivery pressures, the first factory receiving the order illegally subs out some of the order to meet the deadline. The brands have such poor visibility into their own supply chains, that for Rana Plaza, two weeks had passed before Benetton came out and admitted that they had products in Rana Plaza. It was a week after Tazreen (factory fire) that Wal-Mart admitted it had products in Tazreen. These brands intentionally don’t know where their product is being manufactured and they intentionally want to sign a contract with a middleman who is not on the front line.

BGF: So, what’s going to happen to the middleman in the light of these disasters?

Dr O’Rourke: They’re definitely not going to be replaced. None of these brands or retailers want to manage the actual production of their products. They’re going to continue to play a key role and we’ve actually seen an increase in role and an increase in concentration of power and an increasing vertical reintegration among the very large companies. The middlemen are becoming bigger and more powerful and more important. And I would say, that going forward their brands are going to be publicly known. For example, two years ago no one had heard of Foxconn (supplier of electronics) but now Foxconn is a known entity. And the same holds true for Pou Chen (the largest shoe manufacturer in the world) and Li & Fung. I think the middleman will grow in both power and notoriety and their brands will become known brands and they will be targeted by NGOs as key actors in the global supply chain. I don’t see them going away at all; I see them getting stronger.

BGF: How do you source information to rate products according to health, environment and society factors for GoodGuide- your consumer education and information tool?

Dr O’Rourke: We have a science team that conducts ‘product oncology’ which is an assessment using several different scientific methods. We rate our products according to three categories- environment, health and society. For environment, we use life cycle assessments; for health, we use chemical risk assessments and health hazard assessments; and for society we use social impact assessments. Our team looks at a product category and comes up with what matters most on the environmental, health and social impacts across the full life cycle of that product. Our team first identifies what matters most, scientifically, and then develops a complex algorithm with hundreds of attributes, which is passed down to the data team. The data team collects data on those attributes related to the product, the company behind the product and the supply chain. We pull data from different data sources around the world covering six primary areas. These include company self-disclosures, government databases, academic data sources, private research firms, socially responsible investment communities and authoritative NGOs.

The algorithm and data collectively feeds into a process that allows us to rate products and companies on a 10-point scale with 10 being the best. We also have an engineering team that has built our website, iPhone and android apps and a toolbar browser plug-in so consumers can use GoodGuide while shopping on Amazon. We’ve built tools for consumers to help personalize their shopping. The science can be filtered through a consumer’s personal concerns. Example if someone is concerned about animal testing, they can filter out all companies that test their products on animals by using tools on GoodGuide.

The hard work is building the algorithm. Once we’ve built the algorithm, we can rate any company in the world if we can get data on them. It’s a lot of work but it’s designed to be scalable so we can rate any shampoo, any pair of jeans or any cell phone in the world.

BGF: What measurable impact has GoodGuide had?

Dr O’Rourke: We’ve had over 25 million consumers use GoodGuide, a million have downloaded our iPhone app and we have data to show the impact of GoodGuide ratings on consumer purchase and decision-making. On the company side we know from the industries that we’re interacting with, that we’re having a real impact on a number of industries especially in encouraging transparency. We’ve seen a number of industries become much more transparent than they were when we started. And once they become more transparent, we see them phasing out toxic chemicals from their ingredients. But it’s not us alone, we are part of an ecosystem of groups that are moving industries to become more transparent and hopefully phase out some of their worst chemicals and processes.

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The Rana Plaza building collapse… 100 days on

In light of the tragedy at the Rana Plaza building in Bangladesh, the world is scrambling to help the survivors and commemorate the victims. Let us visit the place where it all began and hear the aftermath story from the Director of the International Labor Organization (ILO) office in Dhaka.

The ILO’s branch in Bangladesh has the story.

© Munir Uz Zaman / AFP
© Munir Uz Zaman / AFP

The Rana Plaza building collapse… 100 days on

A number of initiatives have been launched in response to the Rana Plaza building collapse in Dhaka, Bangladesh, which expand upon ILO action following previous accidents in the country. The Director of the ILO Office in Dhaka, Srinivas B. Reddy, explains what these initiatives are and the steps that have been taken on the ground.

What action has been taken during the past three months?

Since April 24, when the Rana Plaza building collapsed, claiming 1,127 lives and injuring many more, the ILO has played a lead role in seeking to address the root causes of the disaster and help rehabilitate injured victims. We are working closely with the Government and employers’ and workers’ organizations (the ILO’s tripartite constituents), to help improve workers’ rights and safety in the ready-made garment (RMG) sector.

In the immediate aftermath of the accident, the ILO sent a high-level mission to Dhaka, headed by the Deputy Director-General for field operations, Gilbert Houngbo. The result of the mission was aJoint Statement, signed on May 4, by the Government and employers’ and workers’ organizations, which set out a six-point response agenda.

What does the response agenda consist of?

The Joint Statement committed the Government of Bangladesh to submitting a set of amendments to its Labour Law, which it did on 15 July, and ILO has commented on it. The response agenda also requires an assessment of all the active RMG factories for fire safety and structural integrity, as well as measures to fix the issues discovered. It also commits the government to recruit, within 6 months, 200 additional inspectors and to ensure that the Department of the Chief Inspector of Factories and Establishments will have been upgraded to a Directorate with an annual regular budget allocation adequate to enable the recruitment of a minimum of 800 inspectors and the development of the infrastructure required for their proper functioning.

It recommends expanding the existing National Tripartite Action Plan on Fire Safety, signed after the Tazreen Fashions factory fire in November 2012. Progress has already been made through an agreement reached on July 25 by the Government, employers and workers to integrate this plan and the Joint Statement to form a comprehensive National Tripartite Plan of Action on Fire Safety and Structural Integrity in the RMG sector.

For those directly affected by the Rana Plaza collapse, a skills training and rehabilitation programme will be launched for those disabled by the disaster and those who were left unemployed.

The Joint Statement also called on the ILO and the International Finance Corporation (IFC) to consider launching a Better Work Programme for Bangladesh. Better Work is a partnership programme between the ILO and the IFC, which aims to improve both compliance with international labour standards and competitiveness in global supply chains.

How does this plan fit with the other response initiatives established by brands, retailers, global unions and other institutions since April?

These emerging response initiatives have endorsed and echoed the now integrated National Tripartite Plan of Action on Fire Safety and Structural Integrity (NTPA) and, in several cases, the ILO’s technical support has been asked for to help ensure their implementation and coordination.

For example, the ILO fulfills the role of neutral chair of the Accord on Fire and Building Safety, signed by global unions and over 80 fashion brands and retailers. The Accord is a five-year programme aimed at ensuring health and safety measures, including the assessment and remediation of structural integrity and fire safety in factories used by the signatories.

Another initiative, the Alliance for Bangladesh Worker Safety, brings together 17 US retailers and brands and aims to inspect and set safety standards in 100 per cent of the factories used by the signatories over the next 5 years.

The Sustainability Compact, between the EU, Bangladesh Government and the ILO, published in July, builds on the NTPA and seeks action on labour rights, in particular freedom of association and the right to collective bargaining, building structural integrity and occupational safety and health, as well as responsible business conduct by all stakeholders engaged in the RMG and knitwear industry in Bangladesh.

The Compact has assigned a coordinating and monitoring role to the ILO. Coordination between these various initiatives will be vital, to ensure they have the desired impact.

These plans sound good in theory but what tangible action has been taken so far?

For its part, the ILO Office in Dhaka is implementing a US$ 2 million, six-month programme from July to December this year.

The first element is assisting the constituent partners in establishing a system to undertake a preliminary assessment of the safety of factory buildings. The ILO will work with the Bangladesh University of Engineering and Technology (BUET) to train 30 specialist teams of structural engineers to undertake these assessments.

In parallel, workers in ready-made garment factories will receive safety training and those injured during the disaster and in previous accidents will begin to receive rehabilitation and skills training.

During the last three months, the ILO has also developed a broader three-year programme to take these actions forward and provide support to several key components of the National Tripartite Action Plan on Fire Safety and Structural Integrity.

This includes ensuring structural integrity assessments by trained engineers of the almost 2,000 factories not covered by the Accord and Alliance and the purchase of necessary equipment. It will also involve training of the 800 labour inspectors referred to earlier and worker and management training in occupational safety and health and worker rights.

Is this the first time that the ILO has worked in this area in Bangladesh?

We have in fact been working closely with the Government and employers’ and workers’ organizations for some time on labour conditions in the garment industry.

For example, since January 2012 a dedicated project on Fundamental Principles and Rights at Work has focused on improving workers’ rights in Bangladesh, particularly in the RMG sector. It has worked with the ILO constituents to improve labour legislation and practices in Bangladesh and to develop labour relations based on rights and responsibilities.

Technical experts from the ILO office in Dhaka have been working closely with the Government during the last year on amendments to the country’s labour law, with a view to bringing it into line with international labour standards.

As previously mentioned, we also promote safer work places and have assisted the Government and social partners in developing the national response to the Tazreen factory fire in November 2012. ILO projects have also produced a fire safety video designed to be shown to and understood by all factory workers in the country and is working on a number of outreach efforts to improve knowledge of occupational safety and health best practices.

What are the next steps in the response?

We will work closely with the Government and employers’ and workers’ organizations as they implement the National Tripartite Action Plan on Fire Safety and Structural Integrity in the RMG sector, over the coming weeks and months.

A priority will be to help ensure that skilled engineers are making initial structural integrity and fire safety assessments of garment factory buildings. These will be undertaken by the engineering teams led by BUET and will be underway by September.

Skills training of disabled workers, in partnership with the Bangladesh Rural Advancement Committee (BRAC), will also be up and running and we will help coordinate services to injured and unemployed Rana Plaza victims through the National Skills Development Council Secretariat.

Training programmes for trade union leaders, mid-level managers and supervisors on occupational safety and health and workers’ rights are also due to begin, along with training to strengthen the labour inspection system.

The ILO will continue to engage with the government and its other constituents with regard to the legislative framework.

Garment Trade Yields Power in Bangladesh- NYT

Credit- Taslima Akhtar for the New York Times
Credit- New York Times/ Taslima Akhtar

While developed countries debate regulations and trade impositions after the Rana Plaza collapse, Bangladesh needs to independently bolster reforms surrounding the garment industry. At present, the garment industry enjoys special privileges like subsidies and tax breaks and, they pay less tax as compared to other industries. Their factories, too, are not all build on legally obtained land, sometimes with environmentally detrimental consequences. The following New York Times article, reported by Jim Yardley, has the complete story.

Garment Trade Yields Power in Bangladesh 

DHAKA, Bangladesh — In the honking, congested heart of this overcrowded capital, one glass office tower stands uniquely alone, surrounded by water, accessible by a small bridge. It is a symbol of the power of Bangladesh’s garment industry, the headquarters of the country’s most powerful association of factory owners. It is also illegal.

So said the Bangladesh High Court, concluding that the land had been illegally obtained, the building had been erected without proper approvals and the location threatened a network of lakes that form the natural drainage system of the capital. The High Court called the building “a scam of abysmal proportions” and ordered it demolished within 90 days.

That was two years ago. The building still stands. The case is now in a legal limbo — more proof, according to critics, of the power of the Bangladesh Garment Manufacturers and Exporters Association. Members control the engine of the national economy — garment exports to the United States and Europe. Many serve in Parliament or own television stations and newspapers.

For two decades, as Bangladesh became a garment power, now trailing only China in global clothing exports, the trade group has often seemed more like a government ministry. Known as B.G.M.E.A., the organization helps regulate and administer exports and its leaders sit on high-level government committees on labor and security issues. Industry trade groups in the United States could only imagine such a role.

But the April collapse of the illegally constructed Rana Plaza factory building, which killed more than 1,100 people, has placed the entire global supply chain that delivers clothes from Bangladeshi factories to Western consumers under scrutiny. And the quasi-official garment group, in the eyes of its critics, presents a major conflict of interest at the center of Bangladesh’s troubles and is a big part of the systemic problems that have made the country a dangerous place for garment workers.

“You can’t put the fox in charge of the chickens,” said Rizwana Hasan, an environmental lawyer. “B.G.M.E.A. has no regulatory authority under the laws of the country. It’s a clubhouse of the garment industry.”

Bangladesh is working to restore the garment industry’s credibility after last month’s decision by the Obama administration to suspend a special trade preference for the country. The European Union is also considering penalties. Bangladesh has responded by passing new labor laws and pledging to inspect the structural safety and legal compliance of the nation’s 5,000 garment factories.

In both instances, the garment group’s interests were well represented. It has hired a team of engineers and is helping oversee the post-Rana Plaza factory inspections — even as the High Court cited the group for a litany of violations on its own headquarters. Meanwhile, the trade group brought its influence to bear in a lobbying campaign as Parliament amended the labor laws this month.

Bangladeshi officials promised to overhaul their labor laws, which fall short of standards defined by the International Labor Organization and tend to suppress unions, contributing to safety problems, labor advocates say. But the results of the overhaul were less significant, especially for the garment industry. One amendment required that industries create profit-sharing programs for workers. But exporting industries, notably the garment sector, were exempted.

Restrictions on labor organizing were eased, but far from fully lifted. The new law requires that 30 percent of factory workers must sign petitions to form a union, a telling obstacle given that many factories have thousands of employees and have few places to hold meetings and organize.

“Bangladesh had a golden opportunity,” said Roy Ramesh Chandra, a labor leader, who said that the political influence of factory owners diluted some of the amendments. “The employers have tremendous influence.”

Business interests dominate Bangladesh’s Parliament. Of its 300 members, an estimated 60 percent are involved in industry or business. Analysts say 31 members, or 10 percent of the country’s national legislators, directly own garment factories, while others have indirect financial interests in the industry.

Factory owners say their political clout is vastly overstated and dismiss suggestions that they exert influence over top elected leaders, and some analysts agree their influence is sometimes overstated. But the trade group clearly is part of the process in ways that set Bangladesh apart.

Three years ago, the prime minister created an industrial police force to maintain order in factory districts and act as an independent arbiter to solve disputes between workers and management. But many workers and labor organizers say the force almost always favors owners. The trade group is even supposed to buy patrol cars for officers.

“This organization is extremely powerful,” said one senior government official, who said much of its clout comes from political contributions. “The political parties are running after money.”

The trade group was formed in 1983 as Bangladesh, then one of the world’s poorest countries, was trying to build its economy by developing a garment industry. Initially, it had no headquarters and no bank account.

“When I first went out there, the B.G.M.E.A. was run out of a garage,” said Don Brasher, who worked as a trade consultant to Bangladesh for more than a decade. “It was not institutionalized at all.”

That quickly changed. Under the rules of global textiles, developing countries faced restrictions on garment exports and, in the case of the United States, were assigned trade quotas. Managing this quota system was critical and complicated. Bangladesh’s government decided to delegate administrative tasks to the trade group — including the authority to regulate certain transactions and collect fees.

“That was pretty extraordinary,” said Mr. Brasher, who lived in Dhaka for two years and worked closely with the group on the quota system. “Ordinarily, that is done by a government agency. There’s nothing like that, anywhere. But it was done out of necessity.”

Bangladesh’s government is notoriously corrupt and has limited bureaucratic capacity to handle the intricate mechanics of global trade. Politics is ferociously contested and marred by regular nationwide strikes, known as hartals. In this environment, the group became a stabilizing force as global trade rapidly grew.

Even after the quota system expired in 2005, the trade group steadily expanded its regulatory responsibilities. Today, it enjoys a near stranglehold on exports: only factories that are among its members are allowed to export woven garments, with some exceptions. The group regulates the importation of fabric and issues certificates of origin, the required proof that a garment is made in Bangladesh. It has arbitration committees to settle disputes and administers the often-complex practice of subcontracting.

On a recent evening, Atiqul Islam, the group’s president, sat at his desk and signed applications from factory owners seeking duty-free status to import machinery. A half-hour earlier, he had presided over a news conference about a skills training program for workers that the group had organized with the United Nations Development Program, the British international development agency UK-AID and the International Labor Organization.

“Zero power,” he said while signing the tax waiver applications, flicking away a question about the group’s influence. “The government decentralized a few things to us, so we are doing them. We can do it much faster.”

Many factory owners portray the industry as a public service, providing millions of jobs. The health of the garment sector is often seen as a national security issue, with the industry accounting for 80 percent of Bangladesh’s manufacturing exports and providing critical foreign exchange. It is the trade group that maintains order in daily operations of the industry, owners say.

“Otherwise, there would be chaos,” said Annisul Huq, a former president of the trade group. “Yes, we can criticize the B.G.M.E.A. But it has a very strong role. Somebody has to lead.”

Factory owners face many challenges in Bangladesh, including high interest rates on loans. But the heroic self-image of the sector is somewhat overstated. Garment factories enjoy subsidies and tax breaks not offered to other industries, and pay less tax. A recent study in a Bengali-language newspaper estimated that these subsidies and tax breaks exceeded tax revenues from the industry by roughly $17 million.

“The doors of the treasury are open for them,” said Badiul Alam Majumdar, secretary of the nonprofit group Citizens for Good Governance. “They extract all kinds of subsidies. They influence legislation. They influence the minimum wage. And because they are powerful, they can do, or undo, almost anything, with impunity.”

One unlikely critic of the trade group is Rubana Huq, the wife of Mr. Huq, who is now the managing director of the family’s garment conglomerate, Mohammadi Group. She said the garment industry in Bangladesh has matured and must be regulated by a transparent, independent arbiter, possibly a new government ministry.

“Of course, there is a conflict of interest,” she said. “There is no reason why a body like B.G.M.E.A. would be credible with the international players.”

Ms. Huq and other critics point to the headquarters building as a symbol of its protected status. Environmentalists have long protested and argued that the building’s location on a de facto island inside a city lake impedes the natural drainage network and contributes to flooding in the capital during the monsoon.

Illegalities abounded, according to the High Court ruling: construction started before the group had won final approval on a building plan; the land transfer from a government agency violated national laws on usage of public land. Yet the group’s leaders argue that the building’s status has been validated at the highest level: two prime ministers led different inauguration ceremonies at the site.

“It is not illegal,” said Mr. Huq, his voice rising. “We have applied to the government for the land. The government has given us the land. Two prime ministers have opened it. What validation do you want?”

But Iqbal Habib, an architect who designed the plan to renew the lake system, said the group could not be exempted from rules governing others. “They are always talking about their compliance with the buyers,” he said. “What about their compliance with the laws of the country?”

For now, the case is stalled. The Supreme Court is supposed to hold a final hearing, but with elections coming, the government has shown little interest in confronting the country’s most powerful industrial bloc. It is unclear if a hearing will take place.

“It has gone to the Supreme Court,” Mr. Huq said. “That could take forever. It is Bangladesh. We have full trust — as long as they give a verdict in our favor.”

He is smiling, joking, to a degree.

 

Julfikar Ali Manik contributed reporting.