On Anniversary of Rana Plaza Collapse NYU Stern Examines Sourcing as Key Cause of Risk to Workers, Human Rights

NYU Center for Business and Human Rights report:  indirect sourcing in Bangladesh root cause of factory safety problems

For Immediate Release: April 24, 2014
Contact: Meredith Mackenzie, West End Strategy Team, meredith@westendstrategy.com; Office: (202) 776-7700; cell: 202-427-2007


NEW YORK, NY -­ As the garment-manufacturing sector in Bangladesh looks back on the deadliest industrial accident in modern history, the memory of those lost in the collapse of Rana Plaza can best be honored by fundamental changes in how garments are sourced.

"The way business is done needs to change in order to protect the human beings who make the Bangladeshi garment sector possible," said Sarah Labowitz, co-director of the center and the co-author of the report, Business as usual is not an option: Supply chains and sourcing after Rana Plaza. (PDF)

"With the absence of regulation by the government of Bangladesh, the prevalence of indirect sourcing has resulted in a supply chain driven by the pursuit of the lowest nominal costs. This means that factories receiving subcontracts are operating on razor-thin margins that leave concerns about safety and workers' rights perpetually unaddressed."

Labowitz is currently in Dhaka to convene a closed-door summit from April 27 -­ 29 and to engage global brands, local manufacturers, government officials, civil society groups, unions, and international donors. This group will consider the report¹s findings and discuss an action agenda for addressing the underlying problems in factory safety and workers' rights.

Though indirect sourcing has helped invigorate the garment industry and Bangladesh¹s economy, global brands doing business in Bangladesh need to assess the overall universe of factories and facilities producing their products and address the most urgent risks.

"Bringing the second and third tier factories who receive subcontracts into the open will make workers safer and help prevent future deadly industrial accidents," said Labowitz. "Enhancing oversight of subcontracting facilities is a long-term project, but the first step is to acknowledge the true scope of the problem."

The NYU report, released Monday, cites indirect sourcing, the opaque practice of subcontracting, as a root cause of safety risks and poor working conditions in Bangladesh. Released one year after the collapse of Rana Plaza became the most deadly industrial accident in modern manufacturing; the New York University Stern Center for Business and Human Rights' report examines a range of measures undertaken in the last year, none of which have yet addressed the fundamental problems facing the garment industry.

"One year after the collapse of Rana Plaza there is a largely unfinished agenda in addressing factory safety issues in Bangladesh," said Mary Robinson, the former UN High Commissioner for Human Rights and former president of Ireland. "This new report from the Center for Business and Human Rights at NYU Stern is a welcome addition to this debate. It offers a much-needed assessment of the business relationships in the global supply chain.  And it provides an ambitious but practical roadmap for the future. I commend NYU Stern School of Business for making human rights issues an integral part of business education."

Additionally, the center found that the two major remedial plans launched in the last year, the Accord and the Alliance, fail to address the risks caused by indirect sourcing. The two initiatives focus on monitoring less than 2,000 factories, while the total number of factories and facilities producing for the export garment sector is likely between 5,000 ­ 6,000. The worst factory conditions are largely in the factories and facilities that fall outside the scope of these initiatives.

The report presents a forward-looking agenda, starting with a collective effort to determine how many factories ­ big and small, registered and unregistered ­ participate in garment manufacturing for the export market. NYU Stern's recommendations call for companies across the sector ­ global buyers and national-level suppliers ­ to join forces to create a single, unified fund for building repairs, safety upgrades and remediation.

"This report also suggests a promising and sustainable path forward that involves global brands, local suppliers, government agencies and even the international donor community," said Richard Locke, director of the Watson Institute for International Studies at Brown University.  "Only through the concerted effort of and cooperation among these actors can we ensure that industrial disasters like those that took place at Rana Plaza and the Tazreen factory never occur again. "'Business as usual is not an option' is required reading for any scholar, manager, activist and government regulator concerned with business and human rights in the global economy."

The report was written by Sarah Labowitz and Dorothée Baumann-Pauly, the center¹s research director. It is based on a yearlong effort by the NYU Stern Center for Business and Human Rights. Labowitz conducted two fact-finding missions to Dhaka in July 2013 and February 2014. In researching the report, the center interviewed more than 100 people about business practices in the supply chain. The center also convened a major meeting in New York in September 2013 that brought together key players from across the garment sector, including Bangladeshi manufacturers and global brands.

For more on the report please click here.

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The NYU Stern Center for Business and Human Rights is focused on what companies are doing and should be doing to ensure respect for human rights in their core business operations. The Center is working to prepare future business leaders with the tools they will need to address complex human rights challenges in a business environment. To advance this mission, the Center is pursuing three primary activities: 1) teaching and research, 2) providing a safe, solutions-oriented convening space for companies and other stakeholders and 3) public education and advocacy.