Bangladesh, Compliance and ethical trading, Corporate Responsibility, Corporate Responsibility/Compliance, Labour standards, Responsible & Ethical Investment

And the first Bangladeshi fund to sign UNPRI is …

Apologies to any readers who dislike acronyms and business buzzwords. But the six UN Principles for Responsible Investment (UNPRI), or PRI for short, simply consist of what they state on the label.

The initiative aims to help investors integrate the consideration of environmental, social, and governance (ESG) issues into their decision-making and ownership practices. The goal is that by addressing these issues across the businesses in which they invest, PRI members will improve the long-term value of their investments and encourage a sustainable financial system.

Although its membership includes specialist ethical investors, UNPRI is aimed at and includes all types of investment institutions among its members, from large asset owners such as pension funds, to banks, fund managers, research houses, and actuaries. Signatories include the California Public Employees’ Retirement System and household names such as HSBC and the Johannesburg Stock Exchange.

Members take as common ground the view that while the market economy has emerged as the most efficient system for allocating economic resources, it is increasingly material for companies and shareholders to address the environmental impacts, social inequalities, and other negative externalities which affect or interact with their business activities.

It asks investors to review and report on the ESG impacts of all the different assets and businesses in which they invest, and to work collaboratively as shareholders to encourage companies to improve their ESG performance and hence, long-term value.

There are sound reasons why UNPRI deserves more attention in Bangladesh. Not least, the principles which were formally launched by Kofi Annan in April 2006, have now been signed by over 1,200 organisations, who between them manage or own $34 trillion, or 15% of the world’s investable assets.

Presently, in the whole of South Asia, there are only three signatories (all in India). This is the same number as in China and Indonesia, meaning that Hong Kong (11) and Luxembourg (14) each have more UNPRI signatories than China, Indonesia, and Saarc put together. While the low sign up rate to UNPRI outside G8 and OECD nations, reflects the organisation’s evolution around the global financial centres of Europe and North America, there are three key reasons why a number of Bangladeshi banks and financial institutions, should already be signatories and active members.

Firstly, some local institutions are already following overlapping or related principles. Indeed, since 2008, via its directive on Mainstreaming Corporate Social Responsibility (CSR), and through its policies on green banking, the Bangladesh Bank has been officially encouraging banks and financial institutions to adopt or follow similar principles.

As an aspirational and voluntary code, with relatively low mandatory fees, there is nothing to stop Bangladeshi financial institutions from signing up to PRI. In fact, its potential benefits in terms of gaining recognition and networking far outweigh the costs involved.

Secondly, Bangladesh can claim a part of one of Luxembourg’s 14 current signatories, the Grameen Crédit Agricole Microcredit Foundation. This not-for-profit organisation registered in Luxembourg, was set up in 2008 by an endowment of 50m euros donated by the French bank Crédit Agricole SA, which is invested to help the foundation encourage microfinance and social businesses around the world.

Thirdly, and most significantly, there is a huge amount of international interest in ethical and responsible business issues within Bangladesh. While policymakers can’t fail to clearly appreciate this in relation to companies and brands directly involved in the RMG industry, it is less widely noticed that many large institutional investors are similarly interested in the country’s development.

After the Rana Plaza disaster for instance, the US-based Interfaith Centre for Corporate Responsibility (ICCR) issued its Bangladesh Investor Statement which by September 2013, had been signed by over 200 other organisations who between them have $3 trillion of assets under management.

The statement appealed to the brands and companies in which signatories invest to, among other steps, join the Accord on Fire and Building Safety stating that: “As investors, we also bear responsibility to enhance the power of the private sector to effect positive change by engaging companies to ensure that human rights remain at the core of their business models.”

Supporters of the Bangladesh Investor statement, who overlap with many of the UNPRI’s 1245 signatories, include large insurance companies and Swedish government pension funds, as well as the core ethical and religious investors which ICCR represents.

For the most part, it can be assumed the analysts who signed this statement are interested primarily in the reputation and supply chains of a few large western brands and retailers in which they hold shares. But to take a flight of fancy, what if it was an equal world, and as global investors these signatories invested assets according to population, so that over 2% of their assets (over $60 billion) were in Bangladesh? Or 2% of the PRI’s $34 trillion …

That’s plenty more reasons for Bangladeshi institutions to sit up and take notice, right? Bangladeshi businesses and financial institutions should be playing just as big a part in participating in developing and shaping international standards of good practice, as they do in trying to meet such standards.

Now, I’ve been around codes of ethics long enough to be ultra conscious that good intentions don’t always lead to good outcomes. Or that a business might be responsible in, say, reducing its greenhouse emissions or improving labour conditions, without having a code of practice on its website, or being signed up to a multi-stakeholder initiative or pressured by its shareholders.

But being realistic is not the same as cynicism. If UNPRI members collectively can’t make a difference by working together on what are after all the key issues of our day, then who can? All the more reason, then, to join them.

The code of practice for opinion-mongers states that one shouldn’t plug a race without tipping a winner. So, I’m going to point people trying to guess which will be the first Bangladeshi  financial institution to sign UNPRI, towards reading the annual reports of BRAC Bank or one of the sharia-compliant institutions.

Brac Bank’s report for example sets as a mission for the organisation to operate under a “triple bottom line” agenda where profit and social responsibility shake hands as it strives towards a poverty-free, enlightened Bangladesh,’’ while the related Brac EPL Investments Ltd was a pioneer in first publishing a Sustainability Report, according to the Global Reporting Initiative guidelines in 2011.

But actually, that’s not the answer. The ultimate answer is actually down to every reader with a bank account, insurance policy or investment fund. As customers, it is up to us to write as consumers to ask our financial institutions to adopt and follow ethical and responsible investment principles.

It’s your money after all. You can influence it. And that includes suggesting that Bangladeshi financial institutions should sign up to UNPRI.

– See more at: https://www.dhakatribune.com/uncategorized/2014/04/04/and-the-first-bangladeshi-fund-to-sign-unpri-is

Bangladesh, Corporate Responsibility, Corporate Responsibility/Compliance, Labour standards

When will the value of a Bangladeshi life go up?

Everyone acknowledges that the value of any single human life is incalculable.Ask an actuary, lawyer, or insurance company however, and they will be able to suggest financial amounts based on hard economics and labyrinthine legal precedent.

Whether in a rich country or a low income nation like Bangladesh, the compensation typically awarded to victims of accidents can never truly be sufficient to compensate for their loss. Even though the law everywhere is usually intended to do just that, the reality of bargaining power and self-interest is that corporations and governments will seek to limit their liability, so it is not unusual for compensation payments to be contested for many years.

In this context, the stakeholders who have signed the Rana Plaza Compensation Arrangement deserve credit for being able to agree a coordinated framework within the year, to compensate the injured workers and dependents of the deceased who died in the Rana Plaza building collapse at Savar on April 24th, 2013.

For families of the 1,133 people killed and over 2,000 injured, this agreement will hopefully increase the amount of much needed compensation and increase the pace of delivery of payments to cover medical costs and income replacement needs.

The Arrangement has been signed by four leading buyers (Primark, Loblaw, Bonmarche, El Corte Ingles), the Bangladesh Ministry of Labour, Bangladesh Employers’ Federation, BGMEA, Bangladesh Institute for Labour Studies (BILS) and labour groups including the global trade union, Industriall. It is also supported by the Clean Clothes Campaign NGO which has been pressing global retailers to do far more to help the families of the disaster’s victims.

Under the agreement, which provides for a single approach for compensation consistent with provisions of ILO Convention No 121, the International Labour Organisation (ILO) is chairing a multi-stakeholder Coordination Committee drawn from the signatories, to make disbursements to victims with instalments pencilled in to have started from February 2014, provided sufficient funds are received, but still, it is embroiled in a suuficiency protest, where the workers are protesting the Tk1.45m compensation amount. According to ILO standards, this figure stands at Tk2.8m.

To finance the payments, international brands and retailers have been approached to make voluntary contributions into a trust fund managed by a global bank and open to other international donors. Any local funds will be kept in a local bank which will also be used to make the payments agreed directly to the beneficiaries.

Although the final total funding needed will only be known once individual claims are determined according to need and medical advice, it is estimated that the total amount disbursed via this agreement will be around $40m. The amounts given will be offset against any other sums already paid to victims by the government and other local and global stakeholders.

Besides the four Canadian and European companies who have signed the Arrangement, over 20 other multinational brands have been linked to the five garment factories which were located in Rana Plaza, but legal caution and denials of liability are expected to deter most from signing up. Bearing in mind that on the day, the magnitude of the disaster was amplified by the negligence of local managers who demanded that workers go into a building that had been officially determined to be unsafe, such reticence comes as no surprise.

This does not mean that other brands outside the Arrangement have not also been active in making payments to victims or in supporting stakeholder initiatives to improve safety conditions. The legally binding Accord on Fire and Building Safety in Bangladesh has been signed by over 100 global companies and the Alliance for Bangladesh Worker Safety brings together major North American retailers who have agreed to make $100m of loans available to improve factories.

Looking to the future, it is the successful implementation of these types of initiative that will be key to ensuring safe working conditions for everyone in the sector.

 For the families of Rana Plaza’s victims however, it is their immediate day to day needs that matter most. No stone should be left unturned to increase the amount of support and finance provided. This is why it is vital that the Rana Plaza Compensation Arrangement has received strong institutional support and credible brand backing. Otherwise it would be all too easy for financial help to be lost in a quagmire of corporate defensiveness and legal dispute. The still-running disputes arising out of the Union Carbide disaster at Bhopal in 1984 highlight the risks to all involved of the cost of failing to settle just compensation as early as possible.

Of course by global standards the amounts people will receive seem small. Inevitably they are limited by factors such as actual wage rates and the low cost of living in Bangladesh, which give rise to a low value for the economic cost of the statistical value of a person’s life in Bangladesh.

Negotiators announcing the Arrangement have talked in ball park figures of families of the dead receiving up to $25,000 each. An unusual amount by Bangladeshi standards no doubt where per capita purchasing power is in the order of $1,900 a year, but no substitute for the loved one lost.

Still it promises to be more than if left to the law alone. In submissions to the High Court committee for determining compensation, the BGMEA was reported to have argued that the 1955 Fatal Accidents Act is not applicable in this case as the death of workers was not caused by “wrongful act, negligence or default’’ of the factory owners themselves. Responding to suggestions to set Tk 19.51 lakh as the amount of compensation for families of each deceased worker, it argued that relatives will get money from life insurance and labour law requires Tk100,000 compensation only.

Had such legalistic argument been stuck to by everyone involved, it is doubtful that the Rana Plaza Compensation Arrangement could have been approved before the end of 2013. The brands who signed deserve recognition that they have transparently acted to increase the amount and speed of compensation available to victims. It is tacit acknowledgement on their part that the vast majority of bargaining power and finance within the garment sector lies in the hands of global buyers and they are the ones with the most ability to facilitate improvements to standards and wages in the industry.

Hence, whilst the deplorable safety conditions that caused the Rana Plaza disaster are directly the fault of individuals enabled by the poor enforcement of safety laws within Bangladesh, it is right that international buyers share in the duty of responsibility towards workers in the industry. Corporate responsibility has to be about doing more than just the bare minimum of what the law requires.

None of this absolves Bangladeshis from taking more action to compensate victims and invest in improving the garment industry ourselves. Yes, there are sound arguments for much of the finance for the initiatives mentioned coming from abroad; global buyers relentlessly seek to drive down the cost of goods and western consumers benefit from the low wage rates of producing countries like Bangladesh. But this does not justify being passive in the face of global market forces.

At the very least, there is a basic moral duty for the garment sector to raise standards itself. More importantly over the medium term, a lot more still needs to be accomplished to raise the estimated $1bn required to build newer factories and spread good practices across the sector.

This is not an impossible challenge. After all, the Bangladesh garment industry would not have become the world’s 2nd largest exporter after China if it did not already have some competitive and fully-compliant world class producers. It should also in the medium term pay for itself by improving productivity and increasing profits.

Key stakeholders share a common interest with garment factory owners and workers in raising average standards in Bangladesh. Most of the problems inherent in ensuring the good working conditions which consumers expect and campaigners are calling for, are endemic to the garment industry worldwide. As buyers who “cut and run” to competing manufacturing countries like Cambodia and India only face running into similar problems elsewhere, it is better all round to improve conditions here and now.

Yet, despite long experience over the past two decades of dealing with stakeholders on compliance and labour standards issues, the BGMEA leadership traditionally places much of its external emphasis on maintaining a low cost model at all costs. This is neither positive strategic thinking for the long term, nor is it positive public relations as it gives the appearance of being over-defensive about poor conditions.

While garment owners have a good case for complaining about the low margins demanded by buyers, it is also the case that much of the impetus and funds for making factory improvements, is coming from overseas companies, campaigners and governments. Much more of this effort needs to come from the industry itself. It is not as if it is completely powerless as large factory owners have considerable economic and political influence within the country.

Members of the BGMEA should for example do more to demonstrate that they too are investing in improving conditions and developing skills training. They could also be more pro-active in building the country’s image, when for example, buyers request meetings abroad to negotiate contracts because of the perceived risks caused by the political climate. What is to stop more producers from arranging secure meetings in Cox’s Bazar rather than spending money to meet in India or Singapore?

As the nation’s dominant industrial sector, garment entrepreneurs owe it to themselves as well as the country’s workers to invest in moving the county’s exports higher up the value chain. They have no choice. Not only is it undesirable in the globalised economy to stay stuck in a race to the bottom, it is impractical. Sooner or later, Bangladesh will become a middle income country. Relying on low labour costs alone will not be sufficient to sustain the nation’s economic growth. This necessitates improving the climate for investment.

The BGMEA should work together with campaign groups and unions to raise standards so that the aftermath of the Rana plaza disaster does not just help to bring about vitally-needed safety improvements, but improves the productivity and sustainability of the industry overall.

Ultimately it will only be by raising living standards overall that the value of a Bangladeshi workers’ life will be raised higher.

Rana Plaza Compensation Arrangement
UN agency International Labour Organisation (ILO) acts as a neutral chair. The Understanding for this Arrangement has been signed by:

  • Buyers (Primark, Loblaw,  Bonmarche, El Corte Ingles),
  • Bangladesh Ministry of Labour, Bangladesh Employers’  Federation (BEF), Bangladesh Garment Manufacturers and Exporters Association (BGMEA),  IndustriALL, Bangladesh National Council, Bangladesh Institute for Labour Studies (BILS),
  • Industriall Global Union and Clean Clothes Campaign

http://www.ranaplaza-arrangement.org/

 

Bangladesh Accord

  • The Accord is an independent agreement  which includes independent safety inspections at factories and public reporting of the results of these inspections. Where safety issues are identified, retailers commit to ensuring that repairs are carried out, that sufficient funds are made available to do so, and that workers at these factories continue to be paid a salary.
  • The Accord is a legally binding agreement. It has been signed by over 100 apparel corporations from 19 countries in Europe, North America, Asia and Australia; two global trade unions, IndustriALL and UNI; and numerous Bangladeshi unions. Clean Clothes Campaign, Workers’ Rights Consortium, International Labor Rights Forum and Maquila Solidarity Network are NGO witnesses to the Accord. The International Labour Organisation (ILO) acts as the independent chair.
  • The Accord recently published its list of nearly 1600 factories which are covered under its provisions on its website. The list includes addresses of the factories involved and estimates that over 1.97m workers are employed at these sites.

http://www.bangladeshaccord.org/

 

 

Alliance for Bangladesh Worker Safety

  • A group of North American apparel companies and retailers and brands have joined together to develop and launch the Bangladesh Worker Safety Initiative, a binding, five-year undertaking that will be transparent, results-oriented, measurable and verifiable with the intent of improving safety in Bangladeshi ready-made garment (RMG) factories. Alliance members represent the overwhelming majority of North American imports of RMG from Bangladesh, produced at more than 500 factories.
  • Supporting associations include: American Apparel & Footwear Association, BRAC, Canadian Apparel Federation, National Retail Federation, Retail Council of Canada, Retail Industry Leaders Association, and United States Association of Importers of Textiles & Apparel. In addition, Li & Fung, a major Hong Kong-based sourcing company which does business with many members of the Alliance, will serve in an advisory capacity.

http://www.bangladeshworkersafety.org/

 

National Tripartite Plan of Action on Building and Fire Safety in the RMG sector in Bangladesh

  • The Government of Bangladesh and representatives of Bangladesh employers’ and workers’ organizations have signed an integrated National Tripartite Plan of Action on Fire Safety and Structural Integrity in the garment Sector of Bangladesh (NTPA).
  • The National Tripartite Committee (NTC) chaired by Labour Secretary, includes Government agencies, employers (BEF, BGMEA and BKMEA) and trade unions.
  • Bangladesh University of Engineering and Technology (BUET) has begun a process to assess the factory buildings that are not part of Alliance or Accord, both for structural integrity and fire and electrical safety. Technical experts of the three initiatives: Accord, Alliance as well as BUET/ NTC  have worked together in joint development of standards to be assessed.

ILO ‘Improving Working Conditions in the Ready-Made Garment Sector’ program (RMGP)

  • RMGP focuses on minimizing the threat of fire and building collapse in ready-made garment factories and on ensuring the rights and safety of workers.
  • The United Kingdom and the Netherlands are jointly contributing US$15 million to the US$24.21 million programme. The ILO is mobilizing further resources.
  • This programme supports the National Tripartite Plan of Action on fire safety and structural integrity and includes a new  Better Work programme -aimed at improving working conditions in the ready-made garment (RMG) industry in Bangladesh.

http://www.ilo.org/dhaka/

– See more at: http://www.dhakatribune.com/long-form/2014/02/18/when-will-the-value-of-a-bangladeshi-life-go-up/

Bangladesh, Corporate Responsibility/Compliance

RANA PLAZA DONORS TRUST FUND

The co-ordination committee of the Rana Plaza Arrangement   http://www.ranaplaza-arrangement.org/  has published fuller details of the Rana Plaza Donors Trust Fund.

The Trust Fund is open to any company, organisation, public body or individual who would like to make a voluntary donation to the families affected by the Rana Plaza tragedy. Full details of how to donate are on its website. http://www.ranaplaza-arrangement.org/fund

Bangladesh, Compliance and ethical trading, Corporate Responsibility/Compliance

Working standards and the Bangladesh RMG sector – the challenge for Brands, Retailers and Producers

In a list of  The Most Controversial Companies of the year 2012   –  published in January 2013 by a private research provider – other research providers are available  –  analysing alleged breaches of international standards relating to 10 global companies as reported in high profile news stories, the horrendous fire  which killed over 117 people at the Tazreen factory in Ashulia near Dhaka in Bangladesh in November 2012,  features at the top of the list ahead of many larger companies.  http://www.laborrights.org/news/coverage-of-the-tarzeen-fire.

This poses a challenge to everyone involved with the garments industry around the world – and is a particular challenge for Bangladesh where RMG is the country’s biggest export and industrial employer. Should not the past 20 years of codes of conduct, compliance, inspection and audits by the industry worldwide be doing more to mitigate this sort of accident….

In part, many would argue it has – although more needs to be done  Impact assessment studies by bodies such as the Ethical Trading Initiative confirm codes of conduct and their associated audits have played a part in improving standards, particularly on easier to audit issues such as child labour. However breaches of core labour standards remain in many industries; In particular, systemic issues or risks associated with long/forced overtime hours, low pay, and discrimination are harder to control or root out. And any massively competitive industry, particularly one operating where there is a large supply of cheap labour like the Ready Made Garments (RMG) export sector in Bangladesh, is likely to face some systemic breaches of standards

–  The challenge therefore is how to spread good practices that already exist in the sector(which is building more modern factories and continuing to achieve growth becoming the 2nd biggest exporter of RMG in 2012 after Chinahttp://www.worldbank.org/en/news/feature/2012/07/03/consolidating-accelerating-exports-bangladesh  ) and raise the playing field as a whole.

Although conscientious efforts made by some retailers and brands (and support for fair trade models by some consumers and producers eg; via  www.ethicalfashionforum.com/,)  are beneficial and improve standards in the short term, in the long run experience suggests that empowering workers to help represent themselves is an essential but oftenoverlooked element in sustainably safeguarding and improving standards –not to mention productivity.

This is not surprising perhaps as freedom of association and collective bargaining are sensitive issues in many countries or politically restricted as in China. In Bangladesh, it is to be hoped that the government’s 2013 national action plan on fire safety and associated investigations in the wake of the Tazreen and similar fires will help to raise standards and prevent further accidents and deaths.  The various multistakeholder initiatives involving brands, unions, the ILO and the BGMEA (Bangladesh Garment Manufactures & Exporters Association) such as that convened by the global garments union (Industriall – January 2013) will hopefully provide a platform for further improvements in working conditions and labour rights; in the past, too much of the Bangladeshi political  debate has been dominated by talk of conspiracies against the industry and speculation about the cause of fires, rather than calmly dealing with first hand testimony from workers (promptly interviewed by local media and news channels) about locked doors and lack of fire exits.

In turn, more brands and buyers need to take their own commitments and responsibilities more seriously – retailers must be expected to follow best practice by fully addressing breaches of labour standards when they are highlighted and  pro-actively working to mitigate problems, implement corrective action plans and raise standards within their supply chains – if they fail to do this or walk away from a problem supplier as Wal-Mart is alleged to have done recently in Bangladesh http://www.thedailystar.net/newDesign/news-details.php?nid=270558, they will rightly face criticism.

Of course if as analysts suggest, the Bangladesh industry’s export growth has been driven mainly by low wages  (all the many genuine efforts to implement codes of conduct notwithstanding) it is easier to understand – if not agree with defensive and nationalistic responses made to calls to increase trade union rights in Bangladesh.  The sector is too important in providing jobs (and bringing millions of women into the formal workforce) for this sort of resistance not to occur. Likewise global market pressures are so competitive that many buyers are happy to take advantage of  this type of race to the bottom.

Certainly with the vast majority of bargaining power and finance within the sector lying in the hands of global  buyers and retailers, they are the ones with the most ability to facilitate improvements to standards and wages,  (which experience suggests can be a win-win by improving productivity rather than being a cost) – so this is arguably where most responsibility lies and where consumers and activists will target most pressure to help raise standards.

http://www.industriall-union.org/industriall-promotes-rights-of-garment-workers-in-bangladesh

http://www.ilo.org/global/standards/lang–en/index.htm

http://www.fibre2fashion.com/news/apparel-news/newsdetails.aspx?news_id=121553

Books and recomendations, Corporate Responsibility, Corporate Responsibility/Compliance

Corporate responsibility – from the Industrial Revolution to 2013 and beyond

Whilst some of the contemporary debate about Corporate Responsibility (CSR) may appear new to some, it is worth remembering that debates about environmental and social impacts in business are at least as old as the industrial revolution itself. Even in the 19th century, some employers made a business case for improving the living conditions of workers and in early 20th century Michigan, Henry Ford argued that raising wages so that the workers who made his cars could also afford to buy them was good both for his workers and his company.

Conscientious citizens have long used their influence as consumers and investors to influence the private sector.  Although boycotts can be counter-productive and are often limited in their effect, they can have huge symbolic power as Gandhi famously demonstrated.  The 1970s and 1980s campaigns against investment in apartheid South Africa and some of the Western multinationals operating there, greatly increased global public and media interest in concepts like ethical investment and corporate responsibility.

Key CSR issues and the UN Global Compact Principles

CR – the Business Case (1)

http://www.crguk.org/

http://www.csrcentre-bd.org/

Although hugely valuable and influential, ethical choices, such as choosing an ethical bank account, or buying goods certified as organic or fair trade are almost by definition always at first a minority choice.  There is also often a moral dimension – who is more useful for the good of wider society, an investor who avoids holding shares in a tobacco company because they do not want to profit from the harm inherent in the product, or the citizen who campaigns democratically for the government to discourage use by raising taxes?   (One answer by the way is that someone could be both.)

Nonetheless, even though the common interest of practitioners is to improve impacts against ESG standards across the board and to mainstream good practice, it would be short sighted to dismiss ethical/moral choices as always a niche/minority activity.  The end of 2012 and start of 2013 saw the tax debate originating in the UK spread  globally (after many years of diligent campaigning and being overlooked by much of the media except for Private Eye)