Experience from Bangladesh with ethical trading initiatives

Codes of conduct are often imposed upon producers supplying Northern markets with the aim of improving working conditions in factories in the South. This study evaluates a) the process of codes implementation and b) the impact of these ethical trading initiatives, in the ready made garment sector in Bangladesh.

Based on interviews with Bangladeshi producers and importers with experience from Bangladesh, the paper finds:

• ethical trading has had a positive impact on the workers in factories that are compliant with codes of conduct, but those in non-compliant firms are worse-off
• working conditions have improved in large factories that receive direct orders from retailers. But small and medium firms, often operating as subcontractors, find it too expensive to comply with the codes. They are losing out in competition with larger factories, where costs of compliance are easier to handle. Many workers have lost their jobs as a result of this
• Due to ethical trading there seems to be a change in importing strategies towards larger factories and longer lasting trading relationships. But this change in strategy can also be explained by an increased preference among importers for higher quality products

The paper specifies a set of recommendations for codes implementation, including:

• specifying to the producers how specific codes of conduct should be interpreted in order to avoid misunderstandings
• importing companies should foster long trading relationships with their suppliers in order to impose codes of conduct
• audits should be shared with other importers from the same factory, which would help to avoid audit fatigue on the part of producers
• importers should improve their knowledge about local legislation in order to integrate it into codes of conduct
• codes should be presented to the management of the supplying firm at an early stage together with quality requirement
• importers should ensure that workers are informed of the codes of conduct
• importers should collect information about labour standards in the contracting firm, and should follow a gradual grading system, which becomes stricter over time
• large producers should consider hiring a team of inspectors to ensure codes are followed
• Bangladeshi labour laws should be revised and updated urgently
• a change in the attitude of factory managers is necessary to bring about improvements in working conditions