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Report: Better Margins Will Improve Compliance in Bangladesh

A new study suggests that Bangladeshi apparel suppliers should do whatever it takes to improve productivity and efficiency in order to reduce production costs and generate additional resources to spend on compliance.

The report, written by the country’s Centre for Policy Dialogue (CPD) and carried out in collaboration with the Friedrich-Ebert-Stiftung (FES) office in Dhaka, said that big companies are increasingly sourcing from countries with poor compliance records, like Bangladesh, and avoid investing in improving workers’ wages and safety in order to keep a competitive advantage and ensure higher profit.

“In a state of fierce competition, low cost for compliance is practiced by market players as a strategic tool,” the report stated, noting that it’s time the positive contribution that Bangladesh’s garment workers make to the global apparel industry is recognized by buyers and suppliers alike. It added, “These two segments of the market need to be integrated properly so that major costs related to compliance are properly specified and necessary spending can be done.”

The study made the following recommendations:

• Apparel firms should increase the amount of funds allocated to maintain compliance, part of which could come from greater production levels.
• Compliance-related expenses should be billed as separate costs and spending on same could be monitored transparently.
• Suppliers should take necessary measures to generate additional resources in order to spend on compliance by further reducing production cost by improving productivity and efficiency, and avoid lowering compliance costs in order to increase return.
• The government should allocate more resources to monitor and inspect compliance at the factory level, and national and international third-parties as well as buyers and retailers should be part of the auditing process.
• International regulations need to be strengthened.
• Agents need to be registered under proper authority, charged with following international guidelines and monitored accordingly.

“The sustainability of the apparel value chain depends not only on economic upgrading but also on social upgrading,” the report concluded. “Along with strengthening the institutional mechanism, both suppliers and buyers have to take responsibility towards ensuring compliance in the production process.”