It’s about time the big buyers were held accountable
In Bangladesh, 50 takas for overtime is not bad.
So Kulsum always works as much as possible. She is a garment worker at Sams Attire, a factory in Dhaka, where the company C&A has shirts, trousers, dresses, and t-shirts made.
Kulsum’s wages are barely enough for a room in a barrack near the factory and for the school fees of the two children. “My husband pulls a rickshaw,” says the 28-year-old. “With his wages we can only buy our food.”
In Zug, Switzerland, 7,000 kilometres from Dhaka, Cofra Holding has its headquarters. It manages the assets of the Brenninkmeijer family, who founded C&A almost 200 years ago and control the international textile group. With estimated assets of 15 billion Swiss francs, the Brenninkmeijers are the eighth richest family in Switzerland according to Swiss magazine “Bilanz.” C&A does not publish figures, family companies do not have to.
But the industry knows that C&A’s turnover has been shrinking for years. Discounters such as Aldi, KiK, Primark, and Lidl sell fashion even cheaper, while chains such as Zara and H&M are attracting more and more customers. In 2018, the Brenninkmeijers were looking for a buyer for their group -- unsuccessfully.
Along came the pandemic
Then came the coronavirus: C&A had to close all 1,400 stores in Europe for weeks.
On March 23, shortly after the outbreak of the pandemic, Martijn van der Zee, C&A’s number two, wrote to suppliers in Bangladesh: “These are extraordinary times, which call for extraordinary [...] measures that will test the strength of our partnerships.” Meaning: C&A cancels all orders until the end of June “with immediate effect” no matter what the status of production. Even clothes that have already been sewn will remain in the warehouses.
C&A is not the only clothing company to abruptly withdraw large orders in Bangladesh and other countries. How various fashion chains have behaved can be seen for the first time in a data set collected by BGMEA. It lists 7,854 cancelled or postponed orders from the fashion industry, including those from Switzerland. The table is a snapshot of a catastrophe at the end of March.
C&A alone is said to have cancelled orders worth $166m. The Swedish company H&M is said to have cancelled orders worth $178m. The Swiss fashion chain Tally Weijl is said to have initially suspended orders worth $7m and cancelled orders worth around $3m. At the end of June, Tally Weijl himself speaks of cancellations of $2.17m. “In the meantime, all these on-hold orders are in production, on their way, or have already arrived at our premises.”
In total, orders worth $3.2bn were cancelled or suspended -- a tenth of Bangladesh’s annual textile exports. The country ships clothes worth about $35bn every year, 84% of exports are T-shirts, dresses, and men’s suits, the export hit.
When we reach Kulsum on her mobile phone in early April, she is sitting in her home with her husband and children. At the end of March, the government had decreed a “nationwide holiday.” Kulsum lost her job and her husband does not earn a single taka anymore. Every day, the landlord demands money. Kulsum is afraid he might kick her family out of the room. “If this continues, it will be very, very difficult,” she says. “If you are poor, you must die.”
In mid-April, thousands of garment workers take to the streets. Some are demanding their wages, others that their factory be re-opened, and others that their factory remain closed because they are afraid of coronavirus infection. Dozens of demonstrators are injured and two women are said to have been killed. Although Prime Minister Sheikh Hasina had promised Tk 500 crore at the end of March to support the textile industry, the government had not yet fulfilled its promise, and payments were running slowly.
Responsible for the chaos is the order stop of the fashion chains. “Almost all governments have paralyzed public life,” argues C&A -- so nothing can be sold in the shops for “weeks, if not months.”
The calculation is simple: No sales, no turnover, no money for the suppliers. They could not expect the group to “keep and/or fulfil the contracts” -- C&A writes to the suppliers in Bangladesh and refers to German law. It allows orders to be suspended or cancelled in cases of force majeure.
Lawyers such as Alan Behr, a New Yorker specializing in the fashion industry, take a critical view of this. The reference to force majeure could be unjustified “since most force majeure clauses do not cite pandemics as a reason for non-payment,” he says. Ultimately, he says, a court would have to rule on this.
The power lies with the customers
Whether it will ever come to that is questionable. After all, the orders are vital for the suppliers’ survival: “Many won’t defend themselves against the fashion companies,” says Christie Miedema of Clean Clothes Campaign, the non-governmental organization campaigns for the rights of textile workers.
When suppliers annoy big customers like C&A, they simply move to the next country like a caravan looking for even cheaper accommodation.
The power lies in the West. Companies like C&A draft the contracts and cancel them. One example of this is the general terms and conditions of C&A. The group allows itself to reduce supplier invoices by up to 12%. C&A allows itself a “discount of 4.5%” if the company pays the invoice within 10 days. “This reads to me like: We take a 4.5% discount on everything,” says an industry expert.
A further 7.5% can be deducted if “another product is delivered or less goods than ordered.” According to the industry expert, the fact that a manufacturer has to deliver an exact quantity is “a hard nut to crack, a gag contract.” Buyers usually accept between 2-3% more or less items of clothing.
Manufacturers in Bangladesh pay raw materials and wages in advance, try to meet tight delivery deadlines, and in the end, all that remains is a small profit. But better a bad order than none at all. That is why the seamstresses earn so badly -- and have to meet growing targets. Fashion companies squeeze the suppliers financially until they “feel great incentives to reduce their costs through exploitation,” according to the non-governmental organization Human Rights Watch.
In Bangladesh, the manufacturers decided to take an unusual approach in their plight: They publicly denounced their customers’ methods and asked them to pay the outstanding debts. “Our situation is apocalyptic,” said Rubana Huq in March. As president of Bangladesh’s textile industry, she says she represents over 4 million garment workers.
“The cancelled and suspended orders from Western fashion houses are bringing us to the brink of ruin.”
In April, when the media reported on the abuses in Bangladesh, C&A’s head of purchasing Martijn van der Zee asked suppliers for understanding: “We know that our first letter shocked you [...]. We too were hit hard and at the time had no other option but to take drastic measures immediately.”
C&A would pay for the goods already shipped and take over the majority of the clothes ordered. On April 23, the company declared, through Cofra Holding, that 93% of the cancelled orders had been resumed. C&A does not want to say to which countries of production and to which period the figure referred to.
A supplier in Bangladesh said at the beginning of May: “C&A is still stopping orders today.” And his factory hardly receives any new orders anymore. At the beginning of May, the Bangladesh Textile Industry Association, after questioning its members, came to the conclusion that C&A wants to cancel 40% of the orders definitely, 20% in December, and the remaining 40% next year.
Open at a cost
After weeks in which her family only ate lentils with rice crackers, Kulsum learns on May 1 that she can go back to work the next day. “Finally,” she says, “I was so happy about the factory reopening that I cooked my husband’s favorite dish -- lentil soup, mashed eggplant, spinach, and rice.”
Up to 6,000 garment workers work in the factory of Sam’s Attire, 600 to 700 per floor. The factory was almost fully occupied right from the start, although only 30% of the workers are allowed. “It is difficult to keep a distance,” says Kulsum.
In mid-May, she will receive just under 60% of her April salary. It was financed with government money, and the factories have to pay back the loan with 2% interest. C&A calls on governments and banks to “speed up access to credit and income support for companies and workers.”
Factories are running again, but there is still a lot of money missing in Bangladesh. One person who talks more openly about this than the suppliers is Scott Nova from the US non-governmental organization Worker Rights Consortium. He assumes that C&A has reactivated about 90% of the orders.
This puts the company in a better position than others. But the problem is not solved. “Conservatively calculated, there is a gap of $20-30m,” says Nova. $2-3m of the C&A funds were missing in salaries today, which corresponds to one month’s wages of 20,000 to 30,000 garment workers.
The fact that textile companies want to delay orders for up to a year is tantamount to a cancellation. “How can the company guarantee that it will take the clothes and pay for them a year later?” asks Nova, a labour lawyer.
In addition, fabrics and clothes have to be stored, otherwise they would go mouldy in the high humidity in Bangladesh. His conclusion: “When millions of dollars are missing, it takes time for the industry to recover from the financial hangover. Suppliers have to close down their factories and lay off workers. Wages drop, leaving families without money for food and rent.”
A spokesman for C&A said: “A complete production of all old orders is not possible and not reasonable, because production in many supplier countries was completely interrupted for several weeks and at the moment can only be resumed in a limited way to protect the factory workers.”
At the beginning of June, Rubana Huq spoke publicly for the first time about the extent of the crisis: “Only 1,926 factories have resumed.” The federation has 4,500 factories as members. The capacity utilization is only 55%. Furthermore, orders had been cancelled, and there was still a shortfall of $430m to pay the wages of the garment workers. About every second job in the textile sector is in danger.
Huq warns: “We blacklist companies that don’t pay and don’t respond to their suppliers.” And for the first time, individual suppliers are threatening to sue buyers.
Dil Afrose Jahan is a Freelance investigative Journalist, and Media Trainer. Benedict Wermter is a reporter from Germany, and Sylke Gruhnwald and Christian Zeier are reporters from Switzerland. The investigation was first published in and written in collaboration with the Swiss investigative platform “Reflekt.” The investigation is partly funded by the European Journalism Covid 19 Support Fund. More information and background material on www.reflekt.ch/bangladesh.