Originally Appeared in Domini Funds' 2013 Annual Report
On March 25, 1911, a fire swept through the 8th-10th floors of the Asch Building in lower Manhattan, occupied by the Triangle Waist Company garment factory. This tragic event, which killed 146 young immigrant workers, helped spur the growth of unions and set in motion a series of legal reforms to protect U.S. garment workers from such preventable disasters.
More than 100 years later, however, garment workers around the world still face the same risks that led to that tragedy. The recent collapse of the Rana Plaza factory complex in Bangladesh was the worst disaster in the history of the apparel industry. The owners of the eight-story complex had illegally added three floors to the building, and although cracks had been seen in the walls the day before the collapse, the factory owner chose to ignore warnings and protests, and ordered workers into the building.
Unfortunately, Rana Plaza was no anomaly. Factory disasters claim the lives of countless workers around the world every year. In Bangladesh, more than 1,800 workers have been killed during the past eight years, and in the past eight months alone, approximately 130 Bangladeshi workers have lost their lives in factory fires.
Globally we have seen a continuous search for the lowest-cost facilities, but nowhere has this issue become as critical as it is in Bangladesh, where the apparel sector employs more than four million people, mostly women. The minimum wage in the country is $38.50 per month, less than half the wage paid in Cambodia and a quarter of the wage paid in China. According to the World Bank, as of 2010, Bangladesh ranked last in terms of minimum wages for factory workers. This race to the bottom has made Bangladesh the second-largest global apparel exporter, behind China. Adding to the problem is a history of weak labor unions and strong representation of factory owners in government. Roughly ten percent Bangladesh’s parliamentary seats are currently held by garment industry leader. The sector’s political influence has been, predictably, an obstacle to meaningful reform.
In the same way that the Triangle Shirtwaist fire brought attention to these issues in the United States a century ago, Rana Plaza has now brought attention to these issues globally. Below, we discuss several paths that companies have taken to improve worker health and safety, particularly in Bangladesh, where the issue has become most critical.
Factory Monitoring Efforts
When we began reaching out to companies to discuss supply-chain sweatshop issues in the mid-1990s, we heard a common refrain: “we don’t own these factories.” However, as responsible investors, consumer activists, students and other labor rights groups engaged with companies to discuss the advantages of taking on greater accountability, things began to change. Companies in a wide range of industries have since adopted codes of conduct for their suppliers and have instituted factory monitoring programs. Many have supplemented these efforts with training programs to educate workers and managers on factory safety and labor rights. Some companies, like Gap, have recognized that a degree of responsibility also lies back at corporate headquarters, where cost-cutting initiatives and last-minute changes to orders can trigger overtime violations and increased pressures on factory managers to cut corners on safety.
It is clear, however, that these efforts have been insufficient to address systemic problems that persist in factories around the world, including excessive hours, forced labor, child labor and safety problems. Many multinational corporations report that they are serving a regulatory function with factory owners that should be played by government. While several leading companies have partnered with civil society organizations to find more lasting solutions, Rana Plaza has made it abundantly clear that more drastic and immediate action is needed.
Banning Production in Bangladesh
Global brands cannot police factory working conditions if they do not know where their clothes are being made. When a company places an order with a factory that meets its standards, it is not uncommon for that factory to ship the order to another factory without the buyer’s knowledge. This practice of unauthorized subcontracting is endemic in Bangladesh, where it is estimated that half of the nation’s roughly 5,000 factories are subcontractors. Even companies with rigorous monitoring programs risk finding their orders being produced at factories not on their approved list. Such was the case when several boxes of Disney sweatshirts were found at the Tazreen factory after a November fire that killed 112 workers.
Our relationship with the Walt Disney Company dates back to 1996, when we first encouraged the company to take greater responsibility over its supply chain. Since then, we have seen a dramatic evolution in its approach to these issues. In addition to providing feedback over the years on Disney’s code of conduct and audit program, we have also visited factories and participated in a hands-on project with Disney and McDonald’s to find a better path towards sustained factory compliance with labor standards.
Two months before Rana Plaza, Disney executives reached out to obtain our feedback on their plans to withdraw from Bangladesh. Disney permits licensing of its name and characters for production in more than 170 countries. While Bangladesh represented only a very small portion of its global sourcing, Disney believed it presented significant risks. Leaving Bangladesh could help the company reduce risk to its brand and allow it to focus efforts where it could most improve working conditions. Therefore, in March, Disney announced that Bangladesh had been removed from its “Permitted Sourcing Countries” list.
Some have accused Disney of “cutting and running,” a tactic that companies use to avoid accountability for sweatshop conditions, but we disagree with those accusations. Disney’s limited economic activity in Bangladesh would have afforded it little leverage with factory management, but by publicly withdrawing, it was able to exercise its leverage as a global brand to send a clear message. The Bangladeshi government needs to understand that substandard working conditions will have economic consequences if it does not take immediate action.
A Shift in Worker Safety Initiatives
For many companies, however, leaving Bangladesh is not a viable option. These companies instead must take a hands-on approach to reform.
In the wake of the collapse, several significant initiatives have arisen to improve worker safety issues. Most notable is the Accord on Fire and Building Safety (the Accord)—a five-year, multi-stakeholder agreement between retailers, non-governmental organizations, and labor unions to maintain minimum safety standards in the Bangladesh textile industry. We believe that this initiative is the best hope for meaningful reform. As a legally-binding agreement, the Accord represents a significant shift from past practice. Its board of directors, which is chaired by the International Labor Organization (ILO), is split evenly between corporations and labor unions. We believe that this equal representation of trade unions is critical. Domini’s Global Investment Standards have always recognized that:
“Healthy and vital unions play a crucial role in addressing the imbalances in power that often arise between corporate management and workers in their struggle for fair working conditions. Without unions, the possibilities for long-term equal partnerships between management and labor would be vastly diminished.”
One Rana Plaza survivor told Time: “The managers forced us to return to work, and just one hour after we entered the factory the building collapsed…" It was not simply lax regulations, political corruption and greed that led to these deaths—it was also fear. In order for desperately poor workers to stand up for themselves, they need strong labor unions.
To date, the Accord has been signed by more than 80 companies, primarily based in Europe. One of the first to sign was Hennes and Mauritz (H&M, Sweden). Over the past three years, we have seen impressive improvements in H&M’s approach to labor conditions in its supply chain. The company has advocated for increases to the minimum wage and for the adoption of a “living wage” standard, and has pledged to remain in Bangladesh even if wages rise.
Some of the other major global brands that have signed the Accord include Fast Retailing (Uniqlo, Theory), PUMA, Carrefour, Tesco, Next and Marks & Spencer. The decision to sign the Accord by Japan’s Fast Retailing, one of the world’s largest retailers, supplements an already impressive social profile, including its practice of publicly reporting the results of its factory audits and the remedial measures its takes. To date, only a handful of American companies, including PVH (Calvin Klein, Tommy Hilfiger) and American Eagle Outfitters, have signed the Accord.
Domini Helps Lead Investor Response to Rana Plaza
In May, Domini worked with other investors affiliated with the Interfaith Center on Corporate Responsibility (ICCR) to draft a public statement urging global companies sourcing from Bangladesh to sign the Accord on Fire and Building Safety and to strengthen local trade unions, disclose suppliers, and ensure appropriate grievance and remedy mechanisms for workers.
More than 200 institutional investors from around the world, representing more than $3.1 trillion, signed our statement. The first 120 signatories came together in only 48 hours, a strong testament to the seriousness of this issue and the need for systemic reform (Read the investor statement).
Citing legal concerns with the Accord, a group of 20 North American retail companies, including Gap, Wal-Mart, Target, Macy’s, Nordstrom and Costco, announced another initiative—The Alliance for Bangladesh Worker Safety (“the Alliance”). While we favor the Accord over the Alliance because of its legally-binding nature and the role of labor unions in its governance structure, both initiatives represent an important shift in approach to worker safety issues. Both the Accord and the Alliance focus on bottom-line, critical reforms to address urgent fire and safety issues; both recognize the need for competitors to work together toward common solutions, to share the results of their factory inspections with each other, and to enforce common standards; both are committed to a level of public transparency; and both recognize the need for workers to have a voice.
Domini is currently helping to coordinate a global investor coalition focused on factory safety in Bangladesh. In the coming months, as we follow developments with the Accord and the Alliance, we will turn careful attention to those apparel companies that have not signed up for either initiative.
Here are a few additional changes we will continue to push for, both in Bangladesh and around the world:
- A global dialogue is needed about the definition and achievement of a sustainable living wage—sufficient for a worker to support a family and save for the future.
- A social safety net should be provided for the families of workers who are injured or killed in the line of work.
- The New York Times reports that children in Bangladesh can tell the latest fashion trend based on the color of the water in the canal that runs past their schoolhouse. The environmental consequences of global supply chains are significant and must be addressed.
- We would like to see the Accord model, which incorporates cross-company information sharing, an active partnership with unions and a commitment to public transparency, become the norm for global supply chains everywhere.
- While Bangladesh may be the flash point today, similar problems persist in other countries around the globe. It is our hope that the reforms sparked by Rana Plaza will reach beyond Bangladesh.
Rozina Akter, a 21-year-old survivor of the Rana Plaza collapse, told the Wall Street Journal: "I'll go back to work as soon as I get better. Not all buildings will collapse." What other choice does she have?
Like the Triangle Shirtwaist fire of another era, we hope to look back on Rana Plaza as a turning point for Bangladesh, and an end to the global “race to the bottom” that this poor country has come to symbolize. We hope that it will catalyze a new era of labor reforms that will provide young women like Ms. Akter with more acceptable and dignified choices. As investors, we will continue to do our part to bring that hope to fruition.
Today, a global coalition of more than 120 institutional investors managing more than $1.2 trillion* issued a statement in response to a series of recent factory disasters in Bangladesh that has taken the lives of more than 1,500 garment workers and left a thousand more seriously injured.
The statement urges global companies operating in Bangladesh to sign a multi-stakeholder factory safety program, the Accord on Fire and Building Safety; strengthen local trade unions; disclose suppliers; and ensure appropriate grievance and remedy mechanisms. The statement was drafted by Domini Social Investments, Boston Common Asset Management, the Interfaith Center on Corporate Responsibility, the Missionary Oblates of Mary Immaculate, and Trillium Asset Management.
The investor signatories commit to further engagement with apparel companies on these issues, stating that: “Regardless of whether products are being sourced from Bangladesh, Guatemala, China or the Philippines, morality dictates that the price/value calculus for all manufactured goods must begin with the fundamental human rights of workers, including health and safety, freedom of association and collective bargaining and a living wage.”
The international coalition of investors came together in only 48 hours, underscoring the urgency of these issues and the deep level of investor concern. The Statement remains open for additional signatories.
*Update: As of July 3, the statement had been signed by over 200 institutions representing more than $3.1 trillion.
The Walt Disney Company’s decision to not allow sourcing in Bangladesh was an appropriate response to a lack of governmental labor enforcement that has manifested itself in a lengthy series of tragedies, including a fire that took the lives of over 100 workers in November and last week’s building collapse that killed more than 400 workers.
Disney permits licensing of its name and characters for production in more than 170 countries, with a range of social, environmental and economic performance. The company states it is simultaneously looking to reduce risk to its valuable brand and focus its efforts where it can improve working conditions. Its limited economic activity in Bangladesh may have afforded little leverage with factory management. Disney chose instead to exercise the significant leverage of its global brand, by publicly withdrawing and sending a clear message to the Bangladesh government to implement the International Labor Organization's Better Work program.
Bangladesh presents a series of systemic problems from low wages to safety, as well as a history of unreported subcontracting that can make it very difficult for brands to ensure acceptable working conditions, or even know where their products are made.
Companies can choose to stay and make the difficult, long-term commitments that will be needed to benefit workers, or they can make a noisy exit, as Disney has. Both courses of action are responsible, and both can be effective. Disney's public departure may, however, in the end, have more impact than its monitoring efforts, had they allowed their licensees to stay.
I applaud those companies that are committed to making a difference in Bangladesh, but when a company’s leverage and economic commitment is minimal, I don’t expect them to stay and suffer the reputational harm resulting from repeated tragedies that are outside their control. I expect them to publicly declare that "enough is enough," and set conditions for their return.
All companies should establish a rigorous and transparent country selection process, backed by meaningful human rights due diligence. They should enter these countries with a commitment to improving conditions by working with all affected stakeholders and, perhaps most important, by strengthening local trade unions. If they simply place orders without that degree of commitment, however, they risk making conditions worse and suffering the ire of their consumers and shareholders.
Following a historic election that brought long-imprisoned democratic leader Aung San Suu Kyi to Burmese parliament, the U.S. government announced the lifting of long-standing economic sanctions on Burma, and corporations announced that they would soon resume business there. In the second quarter of 2012, Domini participated in an in-person meeting with National Security Council (NSC) staff to share our concerns regarding the continued imprisonment of political prisoners; weak rule of law, including a weak judicial system; continuing violence against ethnic minorities; and the potential financing of notorious human-rights violators. Following our meeting, we worked with other members of the Conflict Risk Network (CRN) to develop and submit concrete recommendations to the NSC.
In the wake of the important democratic reforms and the lifting of economic sanctions, the U.S. State Department began work on a set of reporting requirements to ensure that companies doing business in Burma disclose sufficient information to allow the U.S. government to evaluate their impact on human rights and further democratic reforms. In September, we worked closely with the CRN on detailed comments to the State Department in support of its proposal to require such reports. In October, we then submitted our own letter to the State Department with our additional recommendations on reporting requirements. We were pleased to see that the State Department adopted at least two of our recommendations, including a reference to international human rights instruments and our suggestion to require companies that lack human rights due diligence policies to explain why they do not have these policies in place. Unfortunately, our most important concerns regarding public transparency were not addressed.
During the first quarter, we continued to work in coalition with other investors on a follow-up letter to the State Department from the CRN, which Domini signed. We were also one of the leading institutions inviting other investors to sign the letter through the United Nations Principles for Responsible Investment (PRI) network.
Some change happens very quickly. Occasionally the thing that has been accepted for generations disappears very quickly. I’m too young to remember the women’s struggle to vote, but as I look back at the history of the vote, it seems that once it really began, it happened right away.
I’m not too young to remember the birth of feminism. I grew up believing that I’d probably be a mom, but I might teach kindergarten. There weren’t really any sports for me to play, although I did get into a synchronized swimming program in high school. When I graduated from college, I no longer wanted to teach kindergarten and I wasn’t married so I went to typing school. But the change came, and it came in a big hurry. Five years later, I was supporting myself as a financial advisor, teaching investment courses and writing about ethical investing.
I’m not too young to remember the end of smoking. When I was pregnant with my son, who’s now 30, the small office I shared with four others was always full of smoke. In fact after lunch, it was full of cigar smoke. It never even occurred to me that I might ask my fellow workers to show some consideration to a pregnant and uncomfortable woman. But once the ball got rolling, smoking was banned in setting after setting.
The process of long-term sustained change seems to involve a few vital components. First, one needs a countervailing thesis. Women are as much citizens as men are. Smoking is unpleasant and harmful to non-smokers. Next, you need some people to get really, really worked up about it. This vanguard has to be brave about confronting people who disagree with them. After that, the notion is aided by righteousness. Only a fool would consider his wife, mother, daughter or sister incapable of thought. Only a selfish jerk would poison his or her family and friends while poisoning one’s own body. Then comes the toboggan slide, when laws, social norms and manners all come together to assist, rushing to embrace the new understanding.
Recently I got a wedding invitation in the mail. Tommy and Brian were getting married. Because Tommy and Brian live in Massachusetts, this same-sex couple was granted access to the institution of marriage, but in most of the U.S. they would not have had the option. Still, it feels a lot like the “smoking is harmful” days. Polls tell us that Americans in every age group don’t care about sexual orientation and that all but the oldest Americans believe that granting the right to marry to all is long overdue. In fact, I recently heard openly gay former U.S. Representative Barney Frank describe the right to marry as enjoying a tsunami of support, not just on the Eastern seaboard, not just across America, but increasingly, across Europe.
It feels like such a short time ago that I myself did not see any reason to support homosexual marriage. My friend and colleague in the field of responsible investing, Julie Goodridge, sued for the right to marry. I thought it was an awful lot of work and loss of privacy, and there wasn’t anything wrong with living together. But she had been denied the presence of her spouse in the delivery room, and that seemed wrong. She was also denied the benefit of marriage in filing her tax returns, obtaining health care, retirement planning and estate planning. Nobody really cared that Hilary and she were partners, but everyone wanted to deny them the most natural results. So I came around. They won that case. And now Tommy and Brian are married.
These things fill me with great hope. I know in my core that important and positive change can occur. What will be next? Will we use the power of common sense to get our proliferating automatic weapons out of the hands of killers? Will we use it to get help, rather than prison sentences, for the addicted? Will we seek systemic means of providing the highest quality education, food, shelter and health care to our population? There is such a thing as the power of the people, and when you see it used, it is thrilling.
Apple has received significant and persistent media attention for its relationship with Foxconn*, a key manufacturer for the global electronics industry. This attention came to a head early in 2012 with a lengthy New York Times story about working conditions at Foxconn facilities in China supplying products for Apple.
Domini has been paying close attention to working conditions in Apple’s supply chain for several years, and has played an instrumental role in moving the company in the right direction. In 2005, we convinced Apple to adopt its first code of conduct, setting strong standards for its suppliers to follow to protect the basic rights of workers manufacturing Apple products. The code was adopted shortly before the company’s first sweatshop controversy, which also related to Foxconn. Shortly thereafter, the company began monitoring its supply chain and producing transparent annual reports about these efforts and working conditions in these facilities. We have been meeting with the company at least annually since the adoption of their code. Domini was also a lead drafter and coordinator of an investor statement in response to worker suicides at a Foxconn facility in 2010.
This year, Apple made two significant announcements – it released the names of its major suppliers, and joined the Fair Labor Association (FLA), an organization providing thorough and transparent audits of factories for many apparel companies, such as Nike and Adidas. Apple is the first company in its industry to join the FLA. The FLA conducted thorough audits of Foxconn on Apple’s behalf, which were then released to the public, resulting in additional media coverage. We organized an investor call with Apple in April to discuss the FLA’s findings and to receive an update on the company’s supply chain efforts. The FLA audits revealed a number of significant, recurring problems. We discussed Apple’s plans to address these problems, and intend to regroup with Apple later in the year to assess progress.
In response to the ongoing violent crackdown against civilian protestors by the Syrian government, Domini has joined a group of institutional investors calling on publicly traded oil companies to stop fueling the violence. The group of investors — the Conflict Risk Network (CRN) — has called on the oil companies to either halt operations in the country or at least issue statements to the Syrian regime condemning the violence.
In February, we signed a joint letter issued by CRN to oil and gas companies operating in Libya. CRN offered a proposal for a joint escrow account to hold payments that firms would otherwise make to Qaddafi or the National Oil Company. In August, we participated in a letter to Italian oil firm Saras S.p.A., urging it to ensure its products do not facilitate violence committed by Muammar Qaddafi’s regime in Libya.
Domini is a founding member of the Conflict Risk Network, and a member of the organization’s advisory board. CRN seeks to leverage the more than $500 billion in combined assets of its institutional investor members to address mass atrocities and avoid genocide in conflict zones around the world through in-depth research on corporate activity in these regions and direct engagement with companies.
- CRN Press Release on Libya
- CRN Press Release on letter to Italian oil company, Saras
- Investor Letter to Saras
Saras S.p.A is not currently approved for investment by the Domini Funds.
From the Social Sustainability Resource Guide, published by the Interfaith Center on Corporate Responsibility (June 2011).
In August 2010, Domini Social Investments, announced that it had reached an agreement with Nucor, the largest steel producer in the United States, to address the company’s exposure to slavery and illegal deforestation in its Brazilian supply chain. The agreement followed three years of dialogue with the company...
Oral and written testimony to House Committee on Financial Services' subcommittee on International Monetary Policy and Trade: "Investments Tied to Genocide: Sudan Divestment and Beyond" (November 30, 2010). Read a transcript of the hearing on the website of the House Committee on Financial Services.
When your investment dollars buy shares in one company and avoid another, does it really make a difference?
After three years of dialogue with investors, Toyota Motor, the world’s largest automaker, took an important step to distance itself from the brutal military regime in Burma. That step was the direct result of investors who care about how they make money.
To serve responsible investors, Domini uses a comprehensive set of social and environmental standards to select its investments. To apply these standards, our analysts must dig deeply to uncover information many companies would prefer remained in the dark. While researching Toyota Motor in 2006, Shin Furuya, one of Domini’s lead research analysts, discovered that Toyota Tsusho, the company’s major trading partner, was in partnership with the Burmese regime to sell motorcycles, light trucks and cars. The regime tightly restricts the domestic market for these vehicles to its wealthiest citizens, and those with military connections. This information was uncovered in Japanese, and was apparently unknown to both human rights activists and investors.
Based on these factors, and several other concerns, Domini determined that Toyota Motor did not meet our standards for investment. We didn’t buy their stock, but we didn’t let them off the hook. We shared our findings and, together with other investors, expressed our concerns to the company. At a 2007 meeting of the Japan Society, Shin and a colleague from Trillium Asset Management hand-delivered a letter to the chairman of Toyota Motor (Our letter is posted to the website of the Business and Human Rights Resource Centre)
At first, Toyota Motor said that it did not control its trading partner and was not responsible for its actions. Our research, however, showed otherwise. Toyota Motor, Shin found, owned more than 20% of Toyota Tsusho, was Toyota Tsusho’s biggest customer, and had several representatives on its board of directors.
Working with Trillium, Boston Common Asset Management and the Interfaith Center on Corporate Responsibility, we continued to pursue dialogue with the company. Gradually, Toyota’s position changed.
In March 2008, a Toyota official wrote: “I would like to reassure you that Toyota shares your concerns about the human rights situation in Burma.” That August, after three years of dialogue, Toyota Motor revealed that its trading partner had ended its joint venture with the government of Burma.
In November 2010, the Burmese regime intends to hold its first national elections in 20 years. Aung San Suu Kyi, the winner of the 1990 elections, remains under house arrest, and will not appear on the ballot. The regime holds about 2,100 other political prisoners.
Domini’s research process, grounded in our Global Investment Standards, is based on protection of the environment and fundamental human dignity. Toyota Motor’s action, prompted by our concerns, sends an important message that the violent suppression of democracy in Burma is unacceptable.
Read more below:
Read press release issued by investor coalition
Read coverage in Reuters and Socialfunds.com