The promising growth rate of Bangladesh’s industrial sector signifies the nation’s transition into middle-income developing countries. Several sectors, including ready-made garments (RMG), are playing as catalysts driving this growth and development forward. However, being a labor-intensive economy, ensuring workplace safety is a key concern for the country. In recent years, Bangladesh has made significant strides in improving worker safety through labor laws, occupational safety regulations, and environmental protection initiatives.
The member states of the European Union (EU) and other allied countries are developing a set of regulations to address issues such as human rights and environmental protection. EU officials state that Bangladesh should properly adhere to human rights and environmental protection regulations. Failure to comply with the rules will compel brands to sever ties with related organizations through sanctions and fines. However, local manufacturers feel that the number of regulations documented by buyer countries and the cost of compliance are too high. Therefore, they have requested fair pricing from the buyers for their products. Skipping over this issue and imposing sanctions on the country could result in devastating consequences.
M Masrur Reaz, chairman and chief executive officer of Policy Exchange Bangladesh, said all our export destination countries worldwide are placing utmost emphasis on environmental, social, and governance standards. We have to keep up with this trend and make continuous improvements.
“I believe that fire and safety standards of export-oriented companies in RMG, our main export sector, have reached a very advanced and internationally recognized level. Furthermore, there is gradual improvement in terms of working environment and employee benefits,” he said.
Bangladesh is one of the largest apparel exporter countries in the world, with about USD 47 billion industry, accounting for more than 82% of the country’s total export revenue. There are around 4 million garment workers, representing a sizeable part of the country’s 73.69 million total labor force. In 2018, it was estimated that 60.5% of garment workers were women.
According to the latest data (as of 07th March) from Mapped in Bangladesh (MIB), the country currently hosts 3,604 export-oriented garment factories. Of these, 2,534 are affiliated with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), the two organizations representing garment industry owners. Meanwhile, 1,070 factories operate independently of these associations. MIB reports that approximately 2.8 million workers are currently employed in the ready-made garment industry, although some sources estimate this figure to be around 4 million.
In a recent statement, the BGMEA said since its establishment in Bangladesh, approximately 6,885 garment factories have joined BGMEA. However, a substantial number, totaling 3,964 factories, have ceased operations for various reasons, with 317 closures attributed to the challenges posed by the COVID-19 pandemic alone. Of the remaining 2,921 member factories, 2,339 have renewed their membership with BGMEA. Notably, only 1,600 factories among these actively operate by securing direct purchase orders from buyers. The others, facing challenges such as bank loans and various liabilities, operate on a subcontract basis for garment production.
The garment industry is often referred to as the ‘backbone of our economy.’ However, the profound challenges within this sector are not always acknowledged. The potential destruction of this vital industry could disrupt the country’s overall economic balance. Therefore, experts emphasize the critical importance of sustaining the garment industry for the nation’s economy.
However, despite the success of the country’s ready-made garment sector, there have been bitter experiences like the Tazreen Fashion and Rana Plaza tragedies. The Rana Plaza factory building collapsed on 24th April, 2013, resulting in the tragic loss of 1,133 lives and causing severe injuries to thousands. Months before Rana Plaza, in December 2012, a fire at Tazreen Fashion resulted in the tragic loss of over 100 workers’ lives. Following those incidents, numerous demands have been raised with a key focus on ensuring a safe and healthy working environment in factories nationwide. From there on, both the government and the industry owners have been working to develop the working environment.
“After the Rana Plaza incident, there have been improvements in terms of working environment and labor rights through Accord and Alliance initiatives. There is no reason to think that these issues will be fixed overnight. The exporting countries have not made any final decisions on these matters either. They are upgrading the requirements from time to time. Therefore, we must also strive to improve in light of these developments,” Mr. Reaz added.
Measures taken after the Rana Plaza collapse
After the Rana Plaza collapse, the European Buyers’ Coalition Accord (the Accord on Fire and Building Safety in Bangladesh) and the North American Buyers’ Organization Alliance (the Alliance for Bangladesh Worker Safety) started working to improve the working environment in the country’s garment factories. The RMG Sustainability Council (RSC) and the ‘Nirapan’ took over after Accord and Alliance left the country.
The Accord was formally signed on 15th May 2013 for five years to foster a work environment where workers are free from the fear of fires, building collapses, or other preventable accidents by implementing reasonable health and safety measures. Under this program, over 2,000 RMG factories were inspected, and more than 150,000 safety hazards were addressed. Additionally, a safety training program was initiated, which covered 1.4 million workers. This comprehensive approach enhanced safety standards and promoted awareness among the workforce.
Steps ahead
A number of buildings have undergone several safety assessments in recent years with the National Fire Code and the Bangladesh National Building Code (BNBC). In 2022, the government established an Industrial Safety Unit under the Department of Inspection for Factories and Establishments (DIFE), tasked with overseeing industrial safety in the ready-made garment sector and other priority economic sectors. According to the amended Bangladesh Labour Act of 2013, some 6,000 Safety Committees have been formed in several industry sectors. The Labour Act also simplifies the registration of trade unions, resulting in a notable surge in their numbers. As of February 2023, there were approximately thousands of registered trade unions in the garment sector.
The government constituted a national committee in July 2021 to prevent accidents and ensure fair working conditions in factories, industries, and commercial establishments other than ready-made garments and export-oriented industries. This committee has set a target of inspection of about 46,000 factories in different sectors in the country, of which some 5,206 factories have already been inspected. Bangladesh Investment Development Authority (BIDA) is leading this work.
“The owners’ participation in the inspection process was an exceptional example. Through their involvement, they became aware of their organization’s weaknesses. As a result, many of these weaknesses have since been improved,” said Avijit Chowdhury, executive member of BIDA.
A new wage board was formed in 2023 and fixed the minimum wage of garment workers at Tk 12,500 per month, up from Tk 8,000 in 2018.
In April 2023, the International Labour Organization (ILO) said in a statement that Rana Plaza and the other industrial accidents suffered by Bangladesh brought home the urgent need to establish a workplace safety culture in the country’s garment industry and beyond. Over the past 10 years, good progress has been made, such as the establishment of a National Occupational Safety and Health (OSH) Policy and a National Plan of Action. So, all of these measures and outputs reflect a comprehensive and collaborative approach to ensuring and advancing safety practices across various industries. Bangladesh’s garment industry workers are safer than they were a decade ago.
LEED certification: A substantial advancement
Another evidence of the improvement of the industrial working environment is that hundreds of organizations in the country have received LEED recognition. This has been possible due to the goodwill of the industrial owners. The US Green Building Council (USGBC), a non-profit organization that promotes sustainability, was founded in 1993 and gives the Leadership in Energy and Environmental Design or the LEED certification for international recognition of environmentally friendly factories. This certificate is given to the highest-quality factory after strict supervision and a proper analysis of how much environmental protection has been observed at all levels, starting from the construction of the industrial factory building to production. The number of green factories that have received this prestigious certificate is now the highest in Bangladesh.
In 2012, Vintage Denim Studio, located at Ishwardi Export Processing Zone (EPZ) in Pabna district, became the country’s first green factory to receive LEED certification. Subsequently, numerous entrepreneurs took the initiative to establish similar environment-friendly factories. Following the collapse of Rana Plaza, Bangladesh’s reputation suffered a setback among buyer countries. In response to this, the construction of such factories gained significant momentum.
According to BGMEA, the number of eco-friendly garment factories and textile mills in the country has surpassed 200. Currently (as of June 12, 2024), there are 220 eco-friendly factories in the ready-made garments and textile sector, all with LEED certification. Out of them, 84 have platinum, 122 gold, 10 silver, and 4 certified certificates.
Among the top 100 eco-friendly garment factories globally, 54 are located in Bangladesh, and within the top 10, nine are situated in the country. In addition to this, over 500 more factories are in the pipeline for registration as green facilities. BGMEA President Faruque Hassan stated that these improvements mark “an important milestone for the country on the path to sustainable industrialization.”
Other sectors are stepping forward
Apart from the RMG and textile sectors, various industries, including shipyards, footwear, and electronic products, have embraced environmentally friendly practices. For instance, in the leather sector, six tanneries in the country have received certification from the International Leather Working Group (LWG). Additionally, in certain regions of the country, Effluent Treatment Plants (ETP) have been implemented in small-scale weaving industries. On the other hand, aside from industrial factories, eco-friendly commercial buildings are also emerging. This indicates that even without external pressure or obligations, entrepreneurs from different sectors express interest in constructing environmentally friendly industries.
Sakhawat Ullah, General Secretary of the Bangladesh Tanners Association (BTA), said, “Six factories in the country have already obtained the LWG certificate. Additionally, approximately 20 tanneries in the leather industry city are currently eligible to receive this certification. Presently, tanneries are exporting leather at a rate of 85-90 cents per square foot. However, obtaining LWG certification will allow the leather to be sold to European buyers at twice the price.”
Entrepreneurs highlight the numerous benefits of environment-friendly certification, emphasizing that it boosts the confidence of foreign big brands and buyers. Additionally, making sustainable choices in business reduces the probability of accidents and lowers long-term production costs. For example, LEED-certified industries demonstrate savings of around 24 to 50% in energy consumption, a 40% reduction in water usage, and up to a 70% decrease in solid waste production.
S M Sourcing Ltd climbed to the top of the global Leadership in Energy and Environmental Design (LEED) Green Factory ranking, achieving a score of 106 out of a possible 110. Established in 2013 and located in Gazipur, this factory benefits from LEED certification, as highlighted by its CEO, Mirza Shams Mahmud Shakti.
“LEED certification gives us mileage to get orders run factories at full capacity despite the slow demand for apparel in the global market. I hope this preference will facilitate our establishment of a business case within three years, considering the investment required for LEED certification,” he said.
It is essential to acknowledge that the initial investment in constructing a LEED-certified factory is considerably higher. Building such a factory typically incurs costs that are 30 to 40% more than those of a conventional factory. The government has implemented a 2% reduction in corporate tax for LEED-certified factories, aiming to incentivize environmentally friendly practices. Additionally, a dedicated loan fund named Green Finance has been established to provide financial assistance for constructing such factories.
However, the crucial role of buyer organizations should not be overlooked. By offering fair prices for products manufactured in environmentally friendly factories, these organizations can significantly contribute to the growth of such facilities and raise awareness about environmental protection.
The West is also lagging
In a recent report released in January 2024, Amnesty International and Human Rights Watch said communities residing near two major hubs of the fossil fuel industry and petrochemical plants in the United States are consistently exposed to harmful pollution, significantly impacting both their health and human rights.
“Big business is causing devastating consequences for people’s lives and the environment. There is a lack of effective regulatory measures to deter these companies from causing harm,” said Alysha Khambay, Amnesty International’s researcher on business and human rights.
In another report, the European Environment Agency (EEA) stated that the production and consumption of chemicals and related products within the EU significantly impacts the environment and public health within Europe and beyond. Evidence shows that the threshold for chemical pollution on a global scale has been surpassed.
Amidst the Russia-Ukraine war, the United States has emerged as the biggest supplier of crude oil to the European Union. In response to the energy crisis, several European countries, including Germany, are using polluting fuels such as coal.
Any ban will have reverse effect
In a recent event in Dhaka, European Union (EU) officials said that the due diligence law is not only a buyer-seller issue; this is done for the benefit of everyone involved in the supply chain. There are about 32 related conventions. Bangladesh should not only ratify them but also implement them. Bangladesh will have to go through many processes on the way to transition from a least developed country by 2026. Therefore, it is not right to consider the Due Diligence Act as separate. Failure to comply with the rules will compel brands to sever ties with related organizations through sanctions and fines.
At the same program, BGMEA President Faruque Hassan said that several regulations relating to trade have been passed in various European countries in the last few years. However, the basic idea of these is almost the same. This is definitely not sustainable in terms of time and money. So, laws should be universal. Both the buyers and the sellers are required to make this process successful.
International Business Forum of Bangladesh (IBFB) Vice President M S Siddiqui said that in the current financial situation, there is no reality for the producers to comply with this kind of compliance. He remarked, “Social and environmental compliance in the world differs from region to region. In a competitive market, we sell products at the lowest prices while we are burdened with new regulations. It is necessary to amend the global laws and introduce a single system.”
Bangladesh has made significant strides in enhancing worker safety, yet much progress remains to be made. With the impact of the COVID-19 pandemic and the Russian invasion of Ukraine, inflation and price hikes have surged, leading to increased labor wages. These developments have elevated the overall cost of conducting business. Consequently, brands should consider adjusting their payments to accommodate these rising costs.
BKMEA Executive President Mohammad Hatem expressed concerns about the disadvantages they face with pricing. He said that manufacturers are burdened with multiple audit procedures to comply with the varied laws of buyer countries, resulting in increased time and business costs. Hatem emphasized the importance of streamlining these audit procedures.
“On top of that, we must comply with various regulations requiring certificates from organizations across Europe and the United States. Despite meeting all conditions, fair pricing for our products remains elusive”, he added.
As Bangladesh prepares to transition from Least Developed Country status by 2026, it faces numerous challenges, notably the loss of duty-free quota-free (DFQF) access and other trade privileges from developed nations. To maintain economic stability, Bangladesh must prioritize efforts to regain the benefits of the Generalized System of Preferences (GSP) by fully implementing safety measures and adhering to the recommendations of the Alliance and Accord.
“The buying community needs to improve in keeping with the consumer demand. Without this adjustment, exporters cannot sustain their businesses. Therefore, I believe there is no need to fear a ban. Instead, we should showcase our progress to everyone,” remarked Mr. Masrur Reaz.
Shafiqul Islam is a Bangladeshi business journalist and contributing writer. He specializes in small business enterprises, startups, investment, credit, sustainability, recycling businesses, and trade bodies.
