Corporate accountability & RMG sector during Covid-19

During the Covid-19 pandemic, the issue of violation of corporate accountability has been widely discussed and reported globally. Bangladesh's RMG sector has also been criticised multiple times due to the lack of proper decisions and transparency of the concerned authorities throughout this period. A CPD-Shojag coalition study titled "Corporate Accountability of the RMG Sector in view of COVID Pandemic: Challenges in Ensuring Workers' Well-being'' has been conducted recently to examine the practice of accountability of the apparel enterprises of Bangladesh from the perspective of ensuring labour and human rights during this crisis.

 The analysis of this survey is mainly based on primary data. It was conducted on 102 RMG employers, 301 employed RMG workers and 100 unemployed RMG workers located in Dhaka and Gazipur. Here, 76.5 per cent of sample enterprises were small and 23.5 per cent of these were large.

 CORPORATE VALUES IN THE RMG SECTOR: There are guiding principles known as corporate values to assist different business operations. These should be aligned with the country's business and labour laws, and should largely reflect different global guidelines related to corporate accountabilities. This study reveals that corporate values maintained by RMG enterprises are yet to reach the 'basic' level. Because the majority of factories (82.4 per cent) indicated that they had some kinds of guiding principles for business operations, but those were not made public. In maintaining such values, small-scale (76.9 per cent) and non-member (60 per cent) factories are mainly lagging behind as per the survey. Furthermore, management does not engage workers or seldom informs them in formulating/revising the principles. Only 25.5 per cent of workers contributed to such activities, and 37.7 per cent of them were provided training/briefing regarding the guiding principles. 72 per cent of Bangladeshi RMG employers claimed that they conducted their business following their guiding principles entirely. They also claimed that they had principles to let workers speak against malpractice (68.6 per cent) and to prevent discrimination (70.6 per cent). However, it is difficult to assess their commitments and effectiveness as there is no public reporting.

The ongoing pandemic has amplified the importance of practising good governance more than ever. Employers have claimed a significant improvement in providing wages and compensation, ensuring no pressure on workers to complete the work, timely payment of wages, ensuring no discrimination in case of recruitment and release of workers, providing sufficient equipment for accidental emergency, maintaining occupational safety, providing sick and maternity leave to workers, and maintaining a database of workers. However, workers partly agreed with such improvements. 68 per cent of the surveyed workers stated that their workplace is equipped with sufficient materials to face accidental emergencies. 30 per cent of workers mentioned the growing pressure of work, and 22 per cent of them complained about the rise in work-related harassment. While asking the workers about feeling free to speak against any malpractices, they expressed their fear of being 'blacklisted' which would stop them from getting a job in the RMG sector in the future if they said anything against such things. In the case of getting laid-off and recruitment, the workers are still deprived of their basic rights. Only 41 per cent of the employers claimed that they cleared all the dues of workers during laying-off or retrenchment. Workers can hardly challenge the decision of their removal even if it seems unfair or illegal to them. 69 per cent of employers claimed they notified workers of such decisions well before implementing. 70 per cent and 40 per cent of them claimed they informed WPCs or trade unions and DIFE respectively well before its implementation. However, it does not match official data of laid-off/retrenchment issues announced by DIFE with that in different survey-based studies.

IDENTIFYING RISKS AND IMPACTS IN THE RMG SECTOR: In respect of identifying risks and impacts and undertaking appropriate measures following business continuity plans, RMG enterprises have yet to reach the 'basic' level. During the first wave of the pandemic, the average size of workers in a factory has declined by 9.6 per cent. On average, 11.3 per cent male and 8.7 per cent female workers were retrenched. This indicates that factories did not disproportionately retrench more female workers. The majority of workers were laid off during the early months of the Covid-19 attack when enterprises received policy support to pay workers' wages with the condition of no lay-off and retrenchment of workers. 21 per cent of the surveyed laid-off workers who were rehired again by the same employers did not receive anything from their employer during their unemployed period. Only 35.7 per cent of them received a partial wage. Factories have not only failed to comply with their due responsibility to pay workers entitled to benefits but also received government support violating the conditionality. In this issue, both the DIFE and the Central Bank have failed to monitor such irregularities.

According to the interviewed workers' representatives, employers mostly preferred contractual job arrangements for the workers during the crisis given the uncertainty of the market. Most of the workers rejoined under the same grades or same contractual arrangements. Interestingly, there was an upgrade in the contracts (being permanent: 3 per cent) and an upgrade in grades/positions (upgrading the positions: 14 per cent of workers), whereas about 9 per cent of workers claimed that their contract changed to contractual. Some workers were even re-recruited at lower grades, violating the contracts. Note that retrenched workers (at least once) included both early entrants as well as experienced ones in this case, which implies that factories' retrenchment did not necessarily target gender, age, experience rather it was mainly due to lack of orders in hand. Though workers' wages have increased by 5 per cent after a year, it does not indicate any positive change. It is partly happening due to an adjustment of a 5 per cent yearly increment. The fact is that their household income has even declined by 0.7 per cent, and their families are still in a vulnerable state to ensure the same level of livelihood as before. Basically, this has caused a ripple effect in terms of deteriorating food intake (for 75 per cent workers' families) and higher level of borrowing (34.4 per cent) and selling of assets/spending of savings (41 per cent).

Note that the uncertainty of orders for the next six months has decreased from 11.9 per cent in October 2020 to 5.9 per cent in February 2021. Moreover, a higher level of capacity utilisation in 2021 than that of 2020 indicates that factories are now in a better situation to ensure workers' well-being. But the associations' demand for avoiding payment of 5 per cent yearly increment indicates the lack of regard for workers' welfare. Income-expenditure ratio above 1 during the pandemic period also implies that different enterprises, especially large enterprises (1.09) have been able to meet all the expenses and also make some profit. However, the situation has yet to reach pre-Covid level, such as it was 1.17 in 2019 for large enterprises. In this case, there is no scope to raise an excuse not to pay workers' wages, festival bonuses as per timeline and as per law.

ROLE OF STAKEHOLDERS IN THE RMG SECTOR: In order to uphold corporate accountability, it is also crucial for all the actors to assess the impact of their decision on all other stakeholders. However, brands/buyers were largely unable to comply with their responsible business practices during the Covid-19 pandemic. These were reflected in terms of cancellation of orders (4 per cent), settled orders at reduced prices (9 per cent) and deferred payment (8 per cent), and employers accepting orders that did not cover the production cost (12 per cent). They did not even seem to be supportive to the workers of their partner factories as only 14.7 per cent factories received requests from brands not to lay off/retrench workers. On average, in the case of only 1 per cent of orders of employers, brands agreed to accommodate related costs for not laying off. Only 3 per cent and 4 per cent of factories provided health safety equipment for workers and training on ways to avoid getting infected respectively, and most of the other brands did not even address this issue. 14.4 per cent of employers handled at least some orders where production cost was not covered during April-December in 2020, which indicates some brands' unethical practices as they should not offer a price that could not cover such basic costs.

Furthermore, the need for transparency and disclosure in the RMG sector has been felt more deeply, particularly during the ongoing crisis. Only a small section of enterprises claimed that they maintained transparency and disclosure-related principles such as disclosing factory-related information (40 per cent) and financial support from the government (21.6 per cent), publishing annual reports (41 per cent) for the public consumption. Such practices were much lower at small-scale and non-member factories. During this pandemic, transparency and disclosure issues have deteriorated, and many factories have hardly disclosed information about laid-off, retrenchment, and recruitment of workers.

CORPORATE ACCOUNTABILITY FROM THE PERSPECTIVE OF UNEMPLOYED WORKERS: Job loss was a regular phenomenon last year, especially from April to May. In case of job loss, 59 per cent of them received their salaries, while 18 per cent of them received nothing from their employers. Unemployed workers tried to survive by engaging in different temporary and less earned jobs. These workers received a very limited amount of support from the government (21 per cent) and the NGOs (20 per cent). Moreover, female unemployed workers received less support both from the government (16.7 per cent) and from NGOs (18.3 per cent). Due to the absence of proper unemployment insurance or cash support, most of them have cut family costs (88 per cent), and sold assets/used savings (60 per cent) to survive. Besides, the rate of borrowing for unemployed workers has increased to 53 per cent. The unemployment insurance scheme for six export-oriented sectors could not reach these workers due to constraints in the identification of unemployed workers by any authority. Such conditions show the lack of accountability of employers, DIFE and brands.

 IMPLICATION OF STIMULUS PACKAGE SUPPORT ON CORPORATE ACCOUNTABILITY: During the Covid-19 pandemic, 67.6 per cent of factories applied and 62.7 per cent received subsidised credit for four months. However, most workers did not know whether their factories received any benefit from the government or not (57.8 per cent). It is important to note that a good section of enterprises did not receive any benefit. According to the study, 17.6 per cent of factories mentioned that they were non-eligible and could not apply, whereas 12.7 per cent of factories did not even apply although they were eligible. All RMG factories were not included and therefore, all RMG workers were not supported. The package prepared by the government discriminated against different categories of export-oriented factories, and the conditionality of being a member of BGMEA and BKMEA had deprived a good number of factories to apply for this subsidised credit. Although large factories are only 7 per cent of total factories which employ 35 per cent of total workers, the share of support received by large factories is as high as 52 per cent in the case of BGMEA member factories and 35 per cent in the case of BKMEA member factories. On the contrary, small factories, which comprise 48 per cent of total factories have received only a meager share of 4 per cent of the total stimulus package in the case of BGMEA member factories and 15 per cent in the case of BKMEA member factories. Among those who received stimulus package credit, 25 per cent of factories violated the order of not retrenching workers, and this violation was not addressed by the DIFE.

ESTIMATING 'CORPORATE ACCOUNTABILITY INDEX' OF SAMPLE ENTERPRISES: A wide variation can be observed in the corporate accountability index from as low as 21.6 to as high as 92.3. There is a gap of 32.7 per cent between the best and the worst performing enterprises. The corporate accountability index is 29.5 per cent higher in large enterprises compared to small scale enterprises. Among the three indicators of this index, the weakest performance is observed in the case of 'freedom of expression' and the better performance is observed in the case of transparency indicators.

AN OVERVIEW OF NON-MEMBER FACTORIES AND FEMALE WORKERS: The overall survey result indicates that corporate accountability was mostly absent in case of non-member factories both in pre and during this Covid-19 period. Only a smaller section of non-member factories received a loan under the government-announced stimulus packages. They were also among the lowest in terms of receiving other support from the government and brands, which made their practice of corporate accountability more challenging during the ongoing crisis. The conducted survey also indicates that the livelihood challenges were more severe in case of female workers. Although female workers received higher support compared to male workers, an opposite could be observed in case of unemployed workers. Not being able to manage a job in the RMG sector, most of female workers who lost their job shifted to either self-employment or informal jobs. However, around 94 per cent of them still prefer working in the RMG sector.

 According to this CPD-Shojag coalition study, it is clear that most enterprises are struggling to reach the elementary level of corporate accountability in the RMG sector. Large enterprises are likely to reach a 'basic' level while small and non-member enterprises are still at a 'negligible' level. Freedom of expression is the weakest part of the corporate accountability of RMG enterprises. Workers' wages, overtime payment, entitled financial benefits, and payment for laid-off and retrenched workers are always the concerning issues in this sector. Moreover, the majority of workers can hardly challenge the decision of their removal even if it seems unfair or illegal to them. They do not even feel free in speaking against any malpractices being afraid of getting blacklisted. It is evident that there was an absence of required monitoring by the inspecting authorities (DIFE, DoL). The negligence was also observed in the case of monitoring health and safety issues of workers.

 The government should make necessary arrangements of providing subsidised loans in the future to all factories (both member and non-member) involved in export-oriented business operations. It also needs to ensure that the distribution of subsidised credit under the stimulus package to RMG enterprises should not be carried out disproportionately harming the small and non-member enterprises. The central bank in consultation with the ministry of commerce and ministry of labour should make it a mandatory requirement to pay workers' wages through MFS services for accessing loans. In order to make it operational, more bank booths and agent banking facilities need to be introduced in the industrial clusters. As unemployed workers have been confronting severe livelihood challenges due to this pandemic, it is important to immediately clear dues of unemployed workers in a phased manner. The government unemployment insurance fund could be used in this regard.

 This op-ed provides a summary of the key findings of the study titled "Corporate Accountability of the RMG Sector in view of COVID Pandemic: Challenges in Ensuring Workers' Well-being'' conducted by CPD and Shojag. The authors of this study are: Dr. Khondaker Golam Moazzem, Research Director, CPD and Mr Tamim Ahmed, Research Associate, CPD