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Tesco Exiting Myanmar Amid ‘Deep Violation’ of Labor Rights

Tesco, one of Britain’s largest supermarket chains, is in the process of exiting Myanmar “responsibly,” a spokesperson told Sourcing Journal Monday.

The move follows reports that Gtig Eastar Garment (Myanmar) Co., a Chinese-owned garment factory in Wartayar Industrial Zone in the city of Yangon, has refused to compensate thousands of workers after announcing its closure in October, seven months after it was badly damaged in a fire.

Gtig Eastar, according to Myanmar Labor News, made leather jackets for Tesco’s F&F clothing label. Other brands that sourced garments from the factory included C&A, OVS and Zara, it said. Jiangsu Gtig Eastar, the supplier’s parent company, did not respond to a request for comment.

Tesco said it’s wrapping up its final orders with Gtig Eastar and will be pulling out of Myanmar, in line with advice from global unions, more than a year after a violent military coup plunged the Southeast Asian nation into conflict and chaos. The spokesperson said the retailer does not tolerate underpayment of wages and will “always” investigate concerns “thoroughly.”

It did not clarify, however, whether it had made the decision before or after news of Gtig Eastar’s wage non-payment had emerged. Nor did it divulge how much of its total sourcing stemmed from Myanmar, though it appears to be a small fraction. Besides Gtig-Eastar, Tesco worked with just one other supplier—Gainway International (Myanmar) Garment Co. in Thar Du Kan Industrial Zone—in the country, according to an F&F supplier list on its website.

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But Tesco isn’t the only U.K. company cleaning up its supply chain. Just last year, one in five British retailers canceled 7.1 billion pounds ($9.6 million) in contracts last year with suppliers that didn’t meet their ethical and sustainable standards, new research from Barclays Corporate Banking revealed last week.

In a study of more than 300 retail decision makers, 51 percent said sustainability is more important than it was two years ago, and 49 percent said the same about ethical standards. Nearly four in five (79 percent) said they were willing to ride out short-term supply chain disruptions for the sake of long-term ethical and sustainable improvements.

For the 21 percent of retailers who cut suppliers loose because they weren’t up to snuff, the most common reasons they gave were the use of unsustainable materials (39 percent), unfair working hours (37 percent) and a lack of membership to a trade body that monitors ethical and sustainable standards (32 percent). The last is especially indicative of the growing role of supply chain monitoring in risk mitigation. More than one-quarter (28 percent) of the retailers Barclays surveyed signed up to new bodies last year, shelling out an average of 34,500 pounds ($45,700) each to do so.

Labor campaigners take a more measured view of this trend, however. “We’ve seen retail’s ecosystem changing in the last year broadly due to the pandemic and a growth in online shopping habits,” Anna Bryher, advocacy director at Labour Behind the Label, a workers-rights group based in Bristol, told Sourcing Journal. “Retailers may be more concerned about ethics and sustainability, but this is certainly combined with a change in buying habits overall, so [it] shouldn’t be seen as a purely principled switch.”

Retailers also need to ensure that they’re holding themselves responsible for any actions their consequences have on workers instead of cutting and running, she added. Ethical “downsizing” means “making triple sure” that workers are paid after the relationship ends.

“In this downturn, brands collectively cutting relationships with suppliers is leading to factory closures en masse across Asian garment-producing countries,” Bryher said. “In many of these situations, brands cut ties without checking if severance is paid to workers, wages owed reach workers’ pockets, and the most vulnerable in supply chains pay the cost of restructuring. Factories are also downsizing by firing the unionized workers while keeping others, and more, using supply chain disruption as an excuse to undermine labor rights while the world is busy looking the other way.”

The U.K. market is also only one of many. Regarding Gtig Eastar’s alleged severance theft, C&A, which is headquartered in Belgium and Germany, said it has not placed any new orders in Myanmar since last March but that it continued to monitor the “impact on the wellbeing of the factory workers, their freedom of expression and the safety in their communities together with our suppliers and social partners” during the phase-out period. “Nevertheless, we will investigate the content of this article carefully with our former supplier,” a spokesperson told Sourcing Journal.

Zara owner Inditex, which hails from Spain, has not publicly commented about its status in Myanmar, even though the Ethical Trading Initiative, a multistakeholder organization of which it is a member, urged businesses in August to reassess their presence in Myanmar “as a matter of urgency.” ACT (Action, Collaboration, Transformation), a living-wage-focused organization that Inditex belongs to, has also departed from the country, citing its inability to ​​“operate freely under the current circumstances.”

OVS, an Italian brand that topped Fashion Revolution’s Transparency Index last year, said it has remained in Myanmar because it was concerned that withdrawing would result in greater negative consequences for workers. The company told Sourcing Journal that it worked with Gtig Eastar on orders that represented less than 5 percent of the factory’s capacity until 2020, after which it “stopped the cooperation” because the factory was unable to “provide the necessary guarantees to work in full transparency yet.” It maintained previous commitments, however, allowing the factory to complete shipments in early 2021.

“The factory in question has not been our supplier for a long time, but since we understand the criticality of the situation and have a consolidated relationship with the parent company, we will undertake to monitor the situation,” an OVS spokesperson said.

Still, Myanmar’s union leaders say there’s no way brands can monitor their way out of the country’s human-rights morass. Working conditions are deteriorating by the day, they say, with wage theft and forced labor flourishing unchecked. Workers who make underwear for Adore Me and Skims at Bogart Lingerie (Yangon) Limited, told Myanmar Labour News in December, for instance, that they were being pressed into overtime without additional pay, and if they failed to meet quotas, they received nothing.

A spokesperson for Delta Bogart Group, the factory’s Hong Kong-based parent, however, refuted these claims, saying the “proper treatment” of workers was confirmed by internal audits conducted in 2021 by Elevate and Worldwide Responsible Accredited Production.

“Any employees who do work overtime are properly compensated regardless of whether or not they achieve quotas,” a spokesperson told Sourcing Journal, adding that the average salary at the factory is 10 percent to 20 percent higher than the industry average. “In addition, at the onset of the pandemic, we began providing food for all workers every day and continue to do so. In response to Covid-19, vaccines were provided to all our employees fully paid by the Company, and we also provide full-time medical care on-site.” Adore Me and Skims did not respond to emails requesting comment.

But similar allegations surfaced all over the country, said Khaing Zar Aung, the exiled president of the Industrial Workers Federation of Myanmar, yet Western brands continue to “pretend” that they can protect workers’ rights. Freedom of association is now nonexistent, as is social security, she said. Factory owners are also working closely with junta forces to threaten or punish workers who don’t toe the line.

“It is clear that after one year of deep violation of fundamental labor rights, brands and foreign companies are not in the position to respect the UN Guiding Principles on Business and Human rights and the OECD Guidelines on multinationals,” Khaing Zar Aung told Sourcing Journal. “They cannot grant the due diligence, due to the lack of one of the fundamental conditions, which is freedom of association and collective bargaining.”

Editor’s note: This story was updated on Feb 18, 2022, with comments from C&A.