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Brands Abandon Asia Workers in Pandemic

Companies Canceling Orders, Adding to Job Loss, Unpaid Wages

Garment factory workers wear face masks as they end their work shift, near Phnom Penh, Cambodia, March 20, 2020. (c) 2020 AP Photo/Heng Sinith
(London) – Apparel brands’ business practices in response to COVID-19 are exacerbating the economic plight of millions of garment workers in Asia, Human Rights Watch said today. Scores of clothing brands and retailers have canceled orders without assuming financial responsibility even when workers had finished making their products.

These brand actions that increase worker job losses through dismissals and temporary layoffs are contrary to brands’ human rights responsibilities outlined in the United Nations Guiding Principles on Business and Human Rights and the Organization for Economic Cooperation and Development (OECD) Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector. Many supplier factories in Asia are strapped for cash and unable to pay workers’ wages and other compensation because of the brands’ actions.

“These are extraordinarily challenging times, yet clothing brands facing tough business decisions to ride out the COVID-19 crisis should not forsake the factory workers who make their branded products,” said Aruna Kashyap, senior counsel in the women’s rights division of Human Rights Watch. “Brands should take steps to minimize the devastating economic consequences for garment workers in their global supply chains and for their families who depend on this income to survive.”

Human Rights Watch interviewed 11 manufacturers and industry experts, including brand representatives, about the impact of the COVID-19 crisis on factories in Bangladesh, Myanmar, Cambodia, and other Asian countries; reviewed email communications from brand representatives to their global suppliers; and interviewed worker rights groups.

The COVID-19 pandemic has caused clothing brands’ and retailers’ sales to plummet. Many have closed their retail stores to check the spread of the virus. While navigating this crisis, some brands and retailers have taken advantage of unfair purchasing practices, which Human Rights Watch highlighted in its April 2019 report, “Paying for a Bus Ticket and Expecting to Fly,” that fuel labor abuses.

In March 2020, manufacturers from various countries told Human Rights Watch that very few brands assume any of the business risks when placing orders. The former manager of a garment factory in Cambodia said that in their experience, brands typically imposed all payment terms and conditions with no room to negotiate. Big brands and retailers did not make advance payments and had longer payment windows after goods were shipped.

In contrast, the small and medium-sized brands the factory had done business with negotiated better terms, paying up to 30 percent of the purchase order price at the time of raw materials purchase and cleared remaining payments within a week or 10 days of delivery or order completion.

Advance payment and shorter payment windows allow suppliers to maintain better cash flow, affecting their ability to pay wages on time. But the vast majority of brands and retailers do not offer such payment terms – the Better Buying Purchasing Practices Index Report from late 2018 showed that 73 percent of the suppliers who took the survey said that brands and retailers they did business with did not offer advance payments or have favorable payment terms.

During the COVID-19 crisis, many global brands and retailers have made the following demands, asking suppliers to be “flexible” and “understanding”:

  • Canceling orders for goods that workers had already made.
  • Canceling orders for goods that workers were in the process of making.
  • Demanding discounts on products already shipped, dating back to January.
  • Not assuming any financial responsibility or specifying when payments would occur, even in cases where orders were already made or were in process.

A March 27 study by the Center for Global Workers’ Rights and Worker Rights Consortium on the impact of the COVID-19 crisis in Bangladesh reported that of the 316 Bangladeshi suppliers who took the survey, suppliers said that more than 95 percent of brands and retailers refused to contribute to the cost of partial wages for workers who were temporarily suspended or severance payments for those dismissed.

According to the UN Guiding Principles, along with the OECD Due Diligence Guidance on Garments, brands should undertake human rights due diligence to identify and mitigate risks that may cause or contribute to human rights problems in their supply chains. This includes “assessing” actual and potential human rights impacts, “integrating and acting upon the findings,” “tracking responses,” “communicating how impacts are addressed,” and engaging externally to “know and show” that they are taking effective measures.

Thus far, the H&M Group, Inditex (Zara and other brands), and Target USA have taken steps in the right direction. These and likely other companies have committed to take delivery of goods already produced or in production and pay for them as previously agreed upon.

More brands should take similar steps to ensure fair treatment of workers, including payment of wages and other compensation, and minimize job loss, Human Rights Watch said. Nearly 200 institutional investors have urged companies to maintain supplier relationships as much as possible, and make timely and prompt payments to suppliers.

Some global brands are repurposing their supply chains to produce personal protective equipment, including gloves and masks, for medical purposes. Brands and governments should continue to support workers producing essential medical supplies by ensuring that they too receive adequate personal protective equipment and follow occupational health and safety guidance issued by the World Health Organization.

Producing personal protective equipment, however, will not generate sufficient alternative employment for all workers. In Bangladesh, an estimated one million workers have already been laid off or temporarily suspended – a majority of whom did not receive wages and other payments due to them under local laws. In Myanmar, 20,000 workers have already lost their jobs and one industry expert estimated that as many as 70,000 garment workers could lose jobs within a week. In Cambodia, one estimate projected that 200,000 garment workers could lose their jobs.

These governments do not have the financial capacity to provide economic relief packages like those announced by Western governments. Donors and international financial institutions should focus on developing and carrying out plans to immediately alleviate workers’ economic and social distress, and set in motion longer-term measures to provide social protection for workers, Human Rights Watch said.

“Global clothing brands, donors, and international financial institutions should combine forces and urgently undertake efforts with labor rights groups to help low-income workers during the COVID-19 crisis,” Kashyap said. “But longer-term measures are also needed – this pandemic has underscored that social protection schemes for workers and effective mandatory regulations to curb unfair commercial practices of brands in their supply chains are long overdue.”

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