Fire in a bangladesh garment factory case study

Andrew Inkpen

Fire in a Bangladesh Garment Factory In November 2012, a fire in a garment factory near the Bangladesh capital of Dhaka killed 112 people and injured several hundred. The factory was owned by Tazreen Fashions Ltd., a subsidiary of The Tuba Group, a large Bangladeshi garment exporter whose clients included Walmart, Carrefour, C&A, Kmart, and Li & Fung. The factory opened in May 2010, employed about 1,500 workers, and had sales of $35 million a year from the production of clothing such as T-shirts, polo shirts, and fleece jackets. The fire started on the ground floor that was used to store yarn, and quickly spread to the upper floors. The yarn was not stored in a fireproof warehouse, as required by law. The building had eight stories, with the top three floors under construction. Most of the workers who died were on the first and second floors, and were killed because there were not enough fire exits or fireproof, smoke-proof staircases. The fire department also had difficulty in getting its equipment close enough to effectively fight the fire.1

In the aftermath of the fire, questions were raised as to who should be held accountable. Some people argued that the factory owners and the regulators who establish Bangladesh fire safety standards were responsible. Others said that Western clothing companies and retailers who rely on low-cost clothing manufacturing in Bangladesh should ensure that their suppliers have safe factories. Some assigned the blame to Western consumers’ desire for cheap clothing that forced retailers to constantly look for low-cost manufacturing locations.

Bangladesh Garment Industry In 1978, Bangladesh had only a few export-oriented garment factories. Throughout the 1980s and 1990s, the government made a concerted effort to develop the garment sector. Bangladesh was able to effectively deal with the various trade restrictions and agreements associated with textiles, including the Multi-Fiber Arrangement (MFA), which came into effect in 1974 and was phased out in 2004. Although Bangladesh was expected to see reduced garment exports with the phasing out of the MFA, that did not happen.2 The industry grew rapidly because of several factors: low-cost labor; lack of alternative employment options for women; simple technology; low amounts of capital required for industry entry; and economic changes and policies that encouraged industry growth.3 From 1995 to 2010, the volume of exports to the United States and Europe more than doubled, and the industry was growing about 12 percent annually. Industry experts predicted the growth would continue for least another decade.

Bangladesh’s garment industry accounted for 80 percent of Bangladesh’s total export earnings, and was the second largest in the world after China. Total exports in 2013 were expected to exceed $20 billion. Many of the garments carried well-known brand names such as Hugo Boss, Adidas, Puma, Tommy Hilfiger, G-Star, Diesel, Ralph Lauren, Calvin Klein, DKNY, Nike, Benetton, and Mango. Most of the garment exports went to Europe and the United States.

According to the Bangladesh Garment Manufacturers & Exporters Association, the industry had more than 5,500 woven garment factories, 1,700 knitwear factories, and 1,300 spinning, finishing, and dyeing factories. The industry employed about 3.5 million people, of which 80 percent were women working predominantly in low-skill operations. The majority of the workforce was nonunionized, and workers in the export processing zones were barred by law from organizing trade unions. Overtime was common for many workers.

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The Bangladesh ready-made garment production process had three basic operations: cutting, stitching, and pressing/finishing. There was very little automation or R&D. In contrast, companies manufacturing garments in developed countries like Spain had developed new technologies such as robotic sewing machines, in part to counter their much higher cost of labor.

From the perspective of companies sourcing from Bangladesh, McKinsey & Company identified several challenges for the industry:4

• Infrastructure such as electricity, roads, and ports. The poor quality of Bangladesh’s infrastructure was identified as the single largest issue facing the industry.

• The compliance of Bangladesh firms with labor, social, and environmental standards. • Worker productivity. The productivity of Bangladesh workers trailed their counterparts in China and

India. Lower productivity was a function of various factors, including the low educational level of workers, high employee turnover, lack of skilled middle management, and limited investment in new machinery and technology.

• High volatility in raw materials prices because of Bangladesh’s dependency on textile imports. • The risk of political instability and corruption (Bangladesh ranked 144th on the Transparency

International 2012 Corruption Perceptions Index).

The Economist identified Bangladesh’s main advantage as low cost:5

Labour is desperately cheap: the monthly minimum wage of 3,000 taka ($38) is less than a fifth of the going rate in China. The lack of environmental protection is a license to pollute. An advisor to one foreign buyer says there are “no rules whatsoever that cannot be bent.” As a result, retailers’ margins are generous.

Safety in the Industry

Bangladesh had a variety of laws to protect factory workers, including the 2006 Bangladesh Labor Law and the Factories Rules of 1979. Both legal frameworks stress the welfare of workers and settlement of disputes between workers and employers.6 The Factories Rules require specific means for escape in the event of an emergency for factories housing explosive or highly flammable materials, including: “The means of escape shall include at least two separate and substantial stairways permanently constructed either inside or outside the building and which afford direct and unimpeded access to ground level” (see Exhibit 1).

The advocacy group Clean Clothes Campaign estimated that more than 500 people died in more than 30 Bangladesh garment factory fires between 2006 and 2012. No individuals were found guilty for safety violations associated with any of the fires.

In contrast to the regulations, it was normal for factories to have bars in the windows to prevent theft. Emergency exits were rare and, when they existed, they were often locked. According to a former official with the Bangladesh Fire Service, “The owners pay no heed to ensure the minimum safety standards inside the buildings.”7

Another official said, “These [unsafe] factories should be closed, but it is not an easy task. We need to follow a protracted legal battle. Always, there is pressure because the owners are influential. They can manage everything.”8

Aftermath of the Fire Because products destined for Walmart, the world’s largest retailer, were found at the scene of the Tazreen Fashions fire, attention soon shifted to the relationship between Tazreen and Walmart. A May 2011 inspection of Tazreen Fashions was carried out for a Walmart supplier, Canada’s NTD Apparel Inc., according to documents found at the factory and on the website of Tuba Group, Tazreen’s parent company. Tazreen was given a high-risk safety rating after the inspection found that exits and stairwells at the factory were blocked, workers were unaware of evacuation routes, and the factory lacked some firefighting equipment. The documents said Tazreen’s parent, the Tuba Group, promised to make corrections by the end of June 2011.9

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The factory was inspected in December 2011, and, again, serious problems were found. The inspection found an inadequate number of fire extinguishers; partly blocked exit routes; an absence of battery-powered emergency lights on the work floor to help workers escape in case of a power failure; and three exit doors on the ground floor that opened inward, a feature that can be fatal when hundreds of workers are trying to escape a fire. The company that conducted the daylong inspection said it was not responsible for inspecting fire escapes or enclosed stairways. According to the company, “That’s the responsibility of the local building code inspector. We don’t have jurisdiction to inspect the building code.”10

Rajan Kamalanathan, Walmart’s head of ethical sourcing, attributed the problems to inadequate fire safety preparations and poor oversight by Bangladeshi agencies, which he noted were “understaffed” and “unable to adequately and comprehensively monitor all factories.”11

Clean Clothes Campaign posted numerous statements on its website, including:

Many of the workers [at the Tazreen factory] jumped to their deaths trying to escape from the six- story building; others, unable to escape the blaze, were burned alive. The death toll continues to rise as rescue workers plough through the remains of the devastated factory. One firefighter at the scene reported that there wasn’t a single fire exit on the outside of the factory. First reports suggest the fire was started by an electrical short circuit. The cause of over 80% of all factory fires in Bangladesh is due to faulty wiring.12

Immediately after the fire, Walmart issued the following statement:

Nov. 26, 2012—Our thoughts are with the families of the victims of this tragedy. The Tazreen factory was no longer authorized to produce merchandise for Walmart. A supplier subcontracted work to this factory without authorization and in direct violation of our policies. Today, we have terminated the relationship with that supplier. The fact that this occurred is extremely troubling to us, and we will continue to work across the apparel industry to improve fire safety education and training in Bangladesh.13

Walmart’s official position on fire safety is shown in Exhibit 2.

Exhibit 1. Excerpts from Bangladesh Factories Rules of 1979

51. Means of escape in case of fire.

(1) Each room of a factory building shall be provided with not less than two exits for use in case of fire, so positioned that each person will have a reasonably free and unobstructed passage from his work place to an exit.

(2) No such exit shall be less than 32-0” in width and less than 6-6” in height. (3) In the case of a factory building or part of a factory building of more than one story and in which not less than 20

persons work at any one time, there shall be provided at least with one substantial stairway permanently constructed either inside or outside the building and which affords direct and unimpeded access to ground level.

(4) In the case of a factory building or part of a factory building in which 20 or more persons work at any one time above the level of the ground floor wherein explosive or highly inflammable materials are used or stored, or which is situated below ground level, the means of escape shall include at least two separate and substantial stairways permanently constructed either inside or outside the building and which afford direct and unimpeded access to ground level.

(5) Every stairway in a factory which affords means of escape in case of fire shall be provided with a substantial handrail which, if the stairway has open an side, shall be on that side, and if the stairway has two open sides, such handrail shall be provided on both sides.

(6) In the case of a building constructed or converted for use as a factory, after coming into force of these rules, the following additional requirements shall apply: (a) at least one of the stairways shall be of fire-resisting materials; (b) every hoistway or liftway inside a factory building shall be completely enclosed with fire-resisting materials and

all means of access to the hoist or lift shall be fitted with doors of fire-resisting materials; (c) no fire escape stair shall be constructed at an angle greater than 45 degrees from the horizontal; (d) no part of a factory building shall be at a distance (along the line of travel) of 150 or more from any fire escape

stair; and (e) no stairway shall be less than 45” in width.

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Exhibit 2. Walmart Official Position on Fire Safety (from corporate.walmart.com)8

Fire safety is a critically important challenge facing the garment and textile industry in Bangladesh, and at Walmart we are focused on developing and implementing proactive programs to raise awareness of fire safety and increase prevention. We partner with a wide range of organizations and companies to address fire safety in Bangladesh, with an emphasis on establishing industry-leading standards and giving suppliers the support they need to meet them.

Comprehensive Audit Program Our audit program is designed to identify risks and provide information that can help factories take comprehensive preventative measures to prevent fires. In 2010, we conducted an evaluation focused on fire safety in factories in Bangladesh. Factories that fell under the following high-risk categories were asked to phase out production to safer facilities:

• Residential buildings converted to factories • Multi-story buildings located in market areas • Factories in multi-story industrial buildings shared with other factories

In 2012, we strengthened our fire safety standards in Bangladesh, and factories are audited regularly to verify compliance. Examples of these standards include conducting regular fire drills, ensuring adequate number of exit routes, and mandating fire safety training to all levels of factory management. When factories do not meet these standards and corrective action does not occur, Walmart terminates the relationship. Since 2010, Walmart has inactivated 94 factories in Bangladesh due to fire safety issues. A further 23 factories have moved to safer buildings and locations.

Fire Safety Training Programs Walmart has been working across the apparel industry to improve fire safety education in Bangladesh. Through our participation in the Bangladesh Buyers Forum, Walmart has collaborated with 18 other brands to create a training program to increase fire safety awareness among our suppliers and their employees in garment factories. With an expected reach to over 3,000 exporting garment factories in Bangladesh, the BGMEA and BKMEA are providing training for factory management on the use of the films as educational tools.

Ongoing Stakeholder Engagement Fire safety is an industry-wide challenge in Bangladesh and, as a result, we actively work with a variety of stakeholders to raise awareness of fire safety and establish best practices for fire prevention. For example, Walmart is working with the Bangladesh Manufacturers and Exporters Association to reinforce the critical need for improved fire safety, and we are also working with the government of Bangladesh to highlight effective steps that can be taken by the industry as a whole toward improved fire safety.

We regularly meet with NGOs, brands, and other stakeholders to discuss multi-stakeholders efforts, and last year we organized a supply chain meeting on fire safety that was attended by over 150 suppliers in Bangladesh. Continued engagement is critical to verify that reliable, proactive measures are in place to reduce the chance of factory fires. Among other engagements, we are currently in discussions regarding fire safety with several leading retailers and various brands who are participating in the Global Social Compliance Programme (GSCP), with the goal of raising fire safety standards across the industry.

Viewpoints on the Fire Press reports on the Tarzeen fire generated many reader comments. Some of the comments from various New York Times articles are as follows:

As long as Americans hide their heads in the sand, do little to find out where their goods come from, think little of the human sacrifice given for them to have what they want at cheap prices, this will go on and on and on...the buck stops with each and every one of us.

The U.S. cannot be the world’s policeman nor should we demand that our corporations play indus- trial policeman.

Truly disgusting of Walmart and other global retailers to put profits before lives. People should boycott their goods, seriously.

Do I understand this story correctly: Walmart and Sears are being criticized for not having the foresight to know that a fire was going to occur in a building of one of their suppliers in a foreign country? The story notes that the products of many labels were made there and probably includes designer labels. American consumption has lifted many countries out of total poverty, and relative to America and

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Europe many of these countries are still far behind us technologically speaking. However, blaming Walmart and Sears for accidents in other countries is a little overstated.

To those who think the retailers have no responsibility for the workers manufacturing their products. If you want the profits of a global economy, you sure ARE responsible for everyone in your supply chain. You are responsible for who you choose to use as suppliers. If you are big enough to command huge profits, you are big enough to do business that at least has some minimal regard for the people making your profits possible.

This factory did not meet Bangladesh standards—isn’t it Bangladesh’s job to enforce these standards, not the U.S. companies. At some point you have to assume that the subcontractor conforms with his/ her country’s laws. It is up to authorities of the country to enforce the laws—not the U.S. government or the U.S. company.

CEOs are responsible for knowing where their dirt-cheap labor force works and under what conditions; otherwise, they are not earning their astronomical salaries. If they really want safe conditions in the factories where they make their cheap goods, why did they move their productions to impoverished nations that have the world’s lowest standards? The top brass at these disgraceful companies, who pay the lowest salaries they can get away with in this country, have no ethics, no morals, and no valid excuses. And of the one hundred thousand people of Bangladesh who attended the burial of these slave laborers, I’d like to know how many were from Walmart.

Wages are cheap in Bangladesh due to overpopulation—maybe they should look at population control along with factory safety standards. The size of the population, desperate for jobs, means that this incident will be repeated many times in different industries. Overpopulation means cheap wages.

It is obvious that Bangladesh’s government and factories provide inadequate monitoring and enforce- ment on fire safety. But, it is unrealistic to expect governments to enforce labor laws aggressively and shut down unsafe factories. Bangladesh and other low-wage countries are eager to attract apparel orders to create jobs and increase exports. If they act too aggressively in enforcing fire safety laws, they will scare off new investors. Therefore, it is up to the retailers to make sure factories are safe.

Would the people admonishing those not to buy from Walmart please offer an alternative. There isn’t any way to know if the factories from one country to the next are safe for the employees. OK, I can go to Target or Sears, but the clothing is coming from the same factories.

The consumer isn’t responsible. Neither is the retailer who orders through agents and buyers. The factory owner is liable for factory conditions. The countries benefiting from cheap labour contracts are responsible for seeing that safety regulations are in place. It’s all a learning curve.

I’ve lived in India and seen poverty up close. There are worse human rights violations than this fire going on every single day. These people are willingly taking on such poorly paying jobs to make ends meet. Blaming corporations who create these jobs and boycotting them will not help the poor people of Bangladesh.

There is nothing wrong with being a successful businessman. There is nothing wrong with doing well, and making a good living for yourself and your family. There is nothing wrong with making a lot of money—even millions. But one has to ask oneself: When does making that extra profit compromise your moral and ethical beliefs? How much is enough? Would you risk a large number of peoples’ lives just so you can make an extra few percentage points?

It is easy to blame the buyers of the products that are manufactured by these companies that do not conform to minimal safety standards. But let’s get real. Where is(are) the government agency(ies) in these countries that are supposed to enforce the standards? This has become the norm for report- ers to write their stories by editing the news to blame the countries of the West for all the problems of the Third World. The argument of “if the companies didn’t demand low costs for products, these conditions wouldn’t exist.” Really? Blame the government(s) of the 3rd World. Most of the people running the countries are robbing the populace blind. If they don’t care enough about the health and welfare of their own people, what is the rest of the world to think?

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Corporations are not the only group at fault for deplorable working conditions across the globe. U.S. consumers have come to demand a cheap, massive supply of goods so that we can buy and throw away goods at an alarming rate. Though the marketing and advertising does promote this, many of us who drive the consumer economy have a choice of what we purchase. It’s true that getting well- made, humanely sourced goods are more expensive—but by slowing down consumption, this option would be available for many.

As long as Bangladesh’s population continues to grow at an unsustainable rate (one new mouth to feed every four seconds), downward pressure on wages will continue. For all of Walmart’s evils, Third World societies need to take action on their own to better their lot.

It is disingenuous for a company to blame the local government for not doing its job, when the com- pany knows very well that part of the reason there are so many factories in this country is that local labor laws and other laws are not enforced and production costs are lower because of that.

Conspiracies, greedy corporations, ignorance. I’ll bet not one person commenting has ever been involved in any international business transactions, but yet they all know what’s wrong and how things should be handled. The “evil” corporation! Truth is, the evil corporations are run by everyday people with values and the majority of them with integrity. They are dealing with situations that are oftentimes out of their control, yet try to change what they can when they can. Foreign governments set many of the standards, and for the vast majority the jobs that are provided allow the employees to exist and improve themselves.

Endnotes 1 V. Bajaj, “Fatal Fire in Bangladesh Highlights the Dangers Facing Garment Workers,” New York Times, November 25, 2012. 2 M. Yunis and T. Yamagata, “The Garment Industry in Bangladesh,” in T. Fukunishi (ed.), Dynamics of the Garment Industry in Low-Income Countries: Experience of Asia and Africa (Interim Report). Chousakenkyu Houkokusho, IDE-Jetro, 2012. 3 N. Khosla, “The Ready-Made Garments Industry in Bangladesh: A Means to Reducing Gender-Based Social Exclusion of Women?” Journal of International Women’s Studies, Vol. 11, November 2009. 4 McKinsey & Company, “Bangladesh’s Ready-Made Garments Landscape: The Challenge of Growth,” November, 2011. 5 “Disaster in Bangladesh: Rags in the Ruins,” The Economist, May 4, 2013. 6 S. Hammadi, ”Deadly Bangladesh Garment Factory Fire Spotlights Poor Working Conditions,” Christian Science Monitor, November 26, 2012. 7 Ibid. 8 M. Wasikowska, “Bangladesh Factory Where Dozens Died Was Illegal,” Associated Press, December 7, 2012. 9 S. Z. Al-Mahmood, T. Lahiri, & D. Mattioli, “Bangladesh Fire: What Wal-Mart’s Supplier Network Missed,” Wall Street Journal, Dec. 10, 2012. 10 S. Greenhouse & J. Yardley, “As Walmart Makes Safety Vows, It’s Seen as Obstacle to Change,” New York Times, December 28, 2012. 11 Ibid. 12 http://www.cleanclothes.org/news/bangladesh-factory-fire-brands-accused-of-criminal-negligence. 13 http://news.walmart.com/news-archive/2012/11/26/walmart-statement-on-fire-at-bangladesh-garment-factory. 14 http://corporate.walmart.com/global-responsibility/ethical-sourcing/fire-safety-in-bangladesh.

Labor activists the world over are scolding global companies for tolerating such terrible conditions in Bangladesh. The ire is misplaced. Companies such as Walmart, aware of the reputational risks of sweatshop sourcing (and perhaps even run with a kernel of moral sensibility), run themselves ragged trying to monitor working conditions in the factories from which they buy. But determined factory owners abetted by local authorities can always fool inspectors.

Instead, consider the ecosystem in which such tragedies occur. This was but the deadliest bog fire in a swamp created by long-running trade protectionism abroad and retrograde industrial policy at home. Rather than blaming globalization for Bangladeshi workers’ ills, how about pressing Dhaka to give them more of it—more investors, in more industries, bringing more opportunities?

Joseph Sternberg, “Bangladesh Burning: The Factory Fire in Dhaka Sprang from a Particular Political Economy,” Wall Street Journal, November 28, 2012.

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