Investors should increase their leverage on goals and strategies of global brands to ensure that workers in Bangladesh ready-made garment (RMG) factories get living wages, a latest report opined.
According to it, on an average, prices paid to suppliers have dropped by 13 per cent, and lead times for production have shortened by 8.0 per cent, between 2011 and 2015.
The boom of RMG sector is not reflected in the prices, paid to the local garment factories by international fashion brands. The fast expansion of the sector has only benefited some elites within the Bangladeshi society, it added.
This study titled 'Broke in Bangladesh - Nordic Banks and Living Wages in the Garment Sector' and conducted by Fair Action, was released this month.
Fair Action is a non-profit organisation, pushing Swedish companies to take responsibility for their impact on people and environment.
It examines how consumer goods and services are produced, and pressurises companies to improve working conditions and pay living wages with the goal to ensure a sustainable world where human rights are respected.
The study focused on four Nordic fashion brands - H&M, KappAhl, Lindex and MQ - with suppliers in Bangladesh, in which 14 Nordic banks have invested.
The banks are Danske Bank, DNB, Handelsbanken, KLP, Länsförsäkringar, Nordea, SEB, Skandia, Storebrand and Swedbank as well as four savings banks (Sparebank 1 Nord-Norge/ SMN/SR/Östlandet)
In total, the banks hold shares worth over € 1.4 billion in H&M.
"As large owners they have a unique opportunity to influence the company's goals and strategies concerning living wages," the report said.
"None of the banks in this study with investments in H&M, KappAhl, Lindex or MQ is doing enough to push for living wages in the companies' supply chains," it added.
Pointing out to the United Nations Guiding Principles on business and human rights (UNGPs), the report said the banks are therefore obliged to engage with the companies regarding the rights to a living wage.
UNGPs encourage the financial institutions' engagement with the companies they have invested with reference to human rights and labour rights violations.
"H&M, KappAhl, Lindex and MQ all buy clothes from Bangladesh, where employees in the factories are among the lowest paid in the world," the report said.
"Although their legal minimum wage was raised in December 2018, local trade unions and labour rights activists are worried that suppliers will be unwilling to implement it," it added.
The findings in each case show that the banks reviewed have failed to identify, analyse and take sufficient actions on poor wages in the supply chains of the four garment companies.
More specifically, the banks are not demanding concrete objectives and timetables for raising the wages.
"The banks have also failed to demand that the fashion brands share the costs of raising the wages with their suppliers," the report noted.
Furthermore, none of the banks is part of any initiative, addressing the issue of living wages in the textile sector.
It is especially disappointing that the banks have failed to sufficiently hold H&M accountable for the promises made in 2013 concerning living wages.
H&M committed to ensure that the company's strategic suppliers should have pay-structures in place to pay fair living wages to 850,000 workers by 2018.
The banks have not taken the opportunity to follow up on whether the promise has led to actual wage increase at H&M's supplier factories in the countries like Bangladesh, according to the report.
"H&M could use extended or larger contracts as well as price premiums to factory owners with higher wages as an incentive for raising wages."
Its seven-point recommendations included adopting policies that require companies to ensure that workers are paid a living wage, allocating adequate resources and improving sustainable investment processes and methods, and demanding transparency from investee companies.
The report also suggested setting time-framed targets for engagement, using exclusion as a tool in case companies are not responding to engagement, and communicating strategies, goals and engagement results publicly.
Industry insiders and experts, however, said the price squeezing has resulted in persistently low wages that do not cover living needs.
When asked, Faruque Hassan, senior vice president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said: "This is the fact we are pursuing for a long time that the buyers are not offering fair prices of apparels in line with the investments made in safety works, technology upgradation and other areas."
Even, the buyers are still offering previous low rates for the products even after value addition, he noted.
Besides, they are shortening the lead time, putting pressure on manufacturers for quality products with increased risks of air shipment and discount, he added.
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