Fashion brands accused of exploiting millions of workers at risk of layoffs amid Covid-19

Garment workers shout slogans while holding brooms during a protest demanding their due wages in Dhaka on Sept 7, 2020.
Garment workers shout slogans while holding brooms during a protest demanding their due wages in Dhaka on Sept 7, 2020.PHOTO: REUTERS

DHAKA (REUTERS) - Millions of garment workers could lose their jobs as global brands are demanding price cuts and delaying payments to suppliers who are desperate for orders to survive the new coronavirus pandemic, US researchers said on Friday (Oct 16).

Suppliers have been asked to make their prices an average of 12 per cent cheaper than last year, research by the Center for Global Workers' Rights (CGWR) at Penn State University found, describing such practices as "leveraging desperation".

In a survey of 75 factories in 15 countries, suppliers said they had to wait an average of 77 days for payment, compared to 43 days before the pandemic, raising fears of further factory closures in an industry employing 60 million people worldwide.

"We are seeing a dramatic squeeze down of price, reduced orders and late payment," said Mark Anner, author of the report and director of the CGWR.

"This worries me for the wellbeing of the suppliers and the workers. This will affect the small and medium suppliers first."

Fashion companies cancelled orders worth billions of dollars earlier this year as Covid-19 shuttered stores worldwide, leading to wage losses of up to US$5.8 billion, according to pressure group Clean Clothes Campaign.

Suppliers in countries including Cambodia, Ethiopia, Guatemala, India, Mexico, Peru and Vietnam told CGWR that they had already laid off 10 per cent of their workers and would have to cut another 35 per cent of their labour force if order reductions continued.

"If this figure holds true for the entire industry globally, millions of garment workers could be out of work," CGWR said.

Second crisis

Manufacturers and labour rights groups said some orders that were cancelled or suspended earlier in the year were being restored, along with new orders, but they were less than the number of firms jostling for contracts.

"Buyers are taking advantage of this," said Anner, dubbing it an "emerging second crisis" for suppliers after the billons lost in cancelled and unpaid orders earlier in the year.

"It's a little hard to see right away the gravity of the (second) crisis because the new order volume is being mixed with the pay up of old orders that were pent up. It's hiding the new crisis, which is the decline in order value."

More than half of manufacturers surveyed said they would have to close down if the "sourcing squeeze" continued.

The Thomson Reuters Foundation spoke to five garment manufacturers in Bangladesh - which hosts more than half of the 75 suppliers involved in the study - who said they had been forced to cut their prices by 5 per cent to 15 per cent.

Iqbal Hamid Quraishi, a factory owner and a director at the Bangladesh Garment Manufacturers and Exporters Association, said order volumes had risen since September but prices had fallen.

"There isn't much room to negotiate with brands. They tell us that if we don't agree to their price, they can go to other suppliers," said Mr Quraishi, adding that the industry could recover if the second wave of Covid-19 did not hit sales.

The Geneva-based International Organisation of Employers (IOE), a global business network, said brands and suppliers were trying to find solutions in "extremely difficult circumstances".

"Brands ... have shown responsibility by engaging in the joint Call to Action in the Garment Industry, which aims to support manufacturers to survive economic disruption ... and to protect garment workers," said IOE spokeswoman Jean Milligan.

The Call to Action, written in April by the IOE and global unions, seeks to protect workers' incomes and support manufacturers during the Covid-19 crisis by lobbying for loans, social protection schemes and unemployment programmes.

The British-based Ethical Trading Initiative, whose members include H&M and Primark, said that the pandemic was not an excuse to row back on human rights and that it was in everyone's best interest to ensure a sustainable and robust supply chain.