Wednesday, April 10, 2019
Despite evidence pointing to inadequate and often dangerous working conditions within the garment sector, many banks still fail to take labour rights into serious consideration when assessing their financial relations with large clothing companies.
For many years within the garment sector, it seemed as though companies were engaged in a race to the bottom: fighting to provide the cheapest prices, and in turn continuing and endorsing inadequate and hazardous labour conditions. In spite of numerous audits, inspections in garment factories, and pressure from labour unions and NGOs, for many years the industry failed to change. Factory managers turned a blind eye to the problems to avoid loss of production. Unsurprisingly, the garment sector has often been referred to as a sector full of death traps.
It was not until the tragic collapse of the Rana Plaza garment factory in Bangladesh in 2013 – which took the lives of 1,127 individuals – that clothing brands finally began to take responsibility for the catastrophic conditions of the factories they operate in.
The Fair Finance Guide in the Netherlands (FFG NL) drew attention to these labour issues in 2016 through a case study on labour rights in the garment and electronics sector. The study focused on the 10 largest banking groups in the Netherlands and how they address the potential risk of the violation of labour rights in the production and supply chains of their investments. The report also assessed whether the banks are able to respond appropriately when the companies they invest in fail to manage these risks or are known to be involved in such controversies. Unfortunately, almost all 10 banks had financial relations with garment companies which were infamous for unethical practices within their production and value chains. Hence – aside from raising awareness among Dutch consumers – the report was also a means to pressure banks to encourage and support their clients in ensuring better compliance with labour rights.
In June 2016, the Dutch Labour Party asked parliamentary questions on how to prevent future occupationally related fatalities, and entered into discussions with both the Minister for Foreign Trade and Development Cooperation and the Minister of Finance. This generated further talks on improving living wages and trade union freedom, and enabled banks and citizens in the Netherlands to better understand the consequences of flawed labour rights. In addition, FFG NL encouraged banks to recognize the risks of disregarding this aspect of corporate social responsibility and provided recommendations on how to mitigate them.
Since the April 2013 disaster at the Rana Plaza factory, most financial institutions have paid more attention to labour rights adherence within the clothing industry. For example, ABN AMRO now requires a signed Safety Agreement when lending to garment industries, and had previously encouraged its clients to become members of the Bangladesh Accord on Fire and Building Safety and the Fair Wear Foundation, the Business Social Compliance Initiative (BSCI) or other binding agreements. Similarly, Triodos Bank and BNP Paribas (following engagement with the FFG) became signatories of the Bangladesh Investor Statement as of September 2013, meaning that they support the Bangladesh Accord. This Accord – originally implemented in 2013 and renewed in 2018 – is an independent, legally binding agreement between garment retailers, brands and trade unions to ensure the health and safety of Bangladeshi workers in the garment sector. After the Rana Plaza catastrophe, Rabobank engaged with all Dutch clients in the garment retail sector and in 2014, the bank introduced an assessment tool to analyse the sustainability profile of its clients. Actiam (the successor of SNS Asset Management) has also participated in initiatives to engage the garment sector in Bangladesh on the Accord.
In response to FFG NL’s incentives, ING Group published a statement: ‘We can agree with the analysis of the Fair Finance Guide that more attention should be paid to trade union freedom and living wage. We will therefore take a serious look at the recommendations of the Fair Finance Guide.’
Similarly, Aegon reported on Twitter that ‘Aegon has started to engage with two companies from the garment sector, and it is good that Eerlijke Bankwijzer [FFG NL] has brought this [issue] to our attention.’
By scrutinizing these banks and engaging with them about their investments, FFG NL was able to mobilize financial institutions to become more involved in the issue and to realize their role as mediators in the value chains they choose to invest in.
As a result of successful engagement with the banks and government, by the end of 2016, living wage and trade union freedom were explicitly included in the Dutch Banking Sector Agreement on International Responsible Business Conduct Regarding Human Rights. Consequently, the wellbeing of factory workers became a legal responsibility of the financial institutions financing the garment companies.
The creation of the Bangladesh Safety Accord in 2013 was a huge step forward for guaranteeing the safety and health of workers within the garment sector supply chain. With over 210 international brands and retailers committed to the agreement, significant changes have taken place in almost all Bangladeshi garment factories since its implementation. For example, most factories covered by the Accord have now completed over 90% of the renovations required following the initial and follow-up inspections.
Ben Vanpeperstraete, an advocate for the Clean Clothes Campaign, closely monitored the implementation of the Accord and its impact on labour right conditions in over 1,600 factories in Bangladesh. When asked whether there has been positive impact on the ground since 2013, he responded that ‘positive impact is definitely there’ and that ‘safety infrastructure is much more robust within all garment factories in Bangladesh’. He also added that companies are more willing to be transparent and are happier to participate in the Accord, demonstrating a shift in social norms and increased willingness of companies to adhere to these newly developed standards. The fact that more and more financial institutions are requiring the companies they invest in to adhere to these standards adds to the positive impact for workers in the Bangladeshi garment sector.
 FFG NL (2016). ‘Labour Rights Living Wage and Freedom of Association in the Garment and Electronics Sector’. https://fairfinanceguide.org/ffg-international/case-studies/2016/labour-rights-living-wage-and-freedom-of-association-in-the-garment-and-electronics-sector/ (last accessed December 6, 2018).
 Tweede Kamer. (2016). ‘Answer to questions from the members of Kerstens and van Laar about the discrepancy between the policy set by banks with regard to labor rights and the abuses in the clothing and electronics sector’. July 5, 2016. https://www.tweedekamer.nl/kamerstukken/kamervragen/detail?id=2016D28336&did=2016D28336 (last accessed October 9, 2018).
 Jan Willem van Gelder and Margreet Simons. (2015). ‘Dutch Banks: Commitments and Progress’. Amsterdam: Profundo, page. 22. https://www.amnesty.nl/content/uploads/2015/07/geen_embargo.pdf?x93624 (last accessed December 6, 2018).
 Ibid., page 33.
 Ibid., page 52.
 Ibid., page 75.
 ING Group N.V. (2016). ‘ING’s reactive op het Eerlijke Bankwijzer rapport Leefbaar Loon’. https://www.ing.com/web/file?uuid=f9e87267-8001-4ee9-929c-ee9d653d8f2b&owner=b03bc017-e0db-4b5d-abbf-003b12934429&contentid=37362 (last accessed October 9, 2018).
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