In Paris this week on an official visit, Azerbaijan’s autocratic President Ilham Aliyev has already scored one photo op. Anyone reading yesterday’s Azeri media could see dozens of photos of Aliyev posing with leaders of top French companies, including Airbus, Suez, and Credit Agricole.

Azerbaijan's President Ilham Aliyev (L) shakes hands with his French counterpart Francois Hollande as they visit a local French school under construction in Baku, May 11, 2014.

© 2014 Reuters

Today, President Hollande will receive President Aliyev and host an official dinner at Palais de l’Elysee. Again, Parisian photo ops abound. But amid the flashing cameras, one has to wonder where Azerbaijan’s repression of critics and the jailing of opponents fits in the new relationship between Paris and Baku?

In the past few years, Azerbaijani authorities have aggressively gone after the country’s once vibrant civil society, jailing dozens of activists, journalists, and political opponents. It also adopted draconian legislation making it virtually impossible for independent non-governmental organizations to operate.

One year ago, as Azerbaijan’s economy started to suffer from falling oil prices, several of those detained on political grounds were released. That was an important first step, but hopes for progress were short-lived.

Many of those released face travel bans or obstacles to their activities. Dozens are still locked up on political grounds, including opposition activist Ilgar Mammadov, despite repeated calls by the Strasbourg-based Council of Europe for his immediate release. And more activists have been thrown in jail. Recently, one of the country’s most popular journalists and bloggers, Mehman Huseynov, was sentenced to two years in prison for allegedly defaming the police, in response to his brave public denouncement of the police abuses he suffered.

When visiting Paris, Brussels, or other European capitals, President Aliyev hopes to get more business opportunities and investment in Azerbaijan. But he prefers to ignore that the people of Azerbaijan want human rights protections, transparency, and good governance. Those standing up for these values are routinely exposed to attacks and harassment.

Yet what more clear message that Azerbaijan’s crackdown cannot be ignored by potential investors than last week’s decision by the Extractive Industries Transparency Initiative (EITI), an international coalition promoting better governance of resource-rich countries, to suspend Azerbaijan – precisely because of its actions against civil society.

President Hollande should reject a narrative that only finance and economy matter in Azerbaijan. Human rights should be as central to France’s foreign policy as other topics.

Hollande should publicly call for the release of Ilgar Mammadov and all those detained in retaliation for their activism and criticism. A failure to explicitly support human rights principles would be the worst message to those unjustly waiting behind bars.

Author: Human Rights Watch
Posted: January 1, 1970, 12:00 am

Arvind Ganesan is the director of Human Rights Watch’s Business and Human Rights Division. He leads the organization’s work to expose human rights abuses linked to business and other economic activity, hold institutions accountable, and develop standards to prevent future abuses. This work has included research and advocacy on awide range of issues includingthe extractive industries; public and private security providers; international financial institutions; freedom of expression and information through the internet; labor rights; supply chain monitoring and due diligence regimes; corruption; sanctions; and predatory practices against the poor. Ganesan’s work has covered countries such as Angola, Azerbaijan, Burma, China, Colombia, the Democratic Republic of Congo, Equatorial Guinea, India, Indonesia, the United States, and Nigeria. His recent research has focused on predatory lending practices and governance issues on Native American reservations in the United States. He has written numerous reports, op-eds, and other articles and is widely cited by the media.

Ganesan has also worked to develop industry standards to ensure companies and other institutions respect human rights. He is a founder of the Voluntary Principles on Security and Human Rights for the oil, gas, and mining industries and is a founding member of the Global Network Initiative (GNI) for the internet and telecommunications industries, where he also serves on the board. Ganesan has helped to develop standards for international financial institutions such as the World Bank, and regularly engages governments in an effort to develop mandatory rules or strengthen existing standards such as the Kimberley Process. He serves on the board of EGJustice, a nongovernmental organization that promotes good governance in Equatorial Guinea, and is a member of the International Corporate Accountability Roundtable (ICAR)’s steering committee.

Before joining Human Rights Watch, Ganesan worked as a medical researcher. He attended the University of Oklahoma.

Posted: January 1, 1970, 12:00 am

This ACE Cash Express outlet on San Mateo Boulevard in Albuquerque, New Mexico sits on a block with several small loan storefronts. The lenders who advance people money on their paychecks charge exorbitant interest rates that often snare the most vulnerable customers in a cycle of debt.

© 2015 Vik Jolly/AP Photo

(Washington, DC) – The Consumer Financial Protection Bureau should not rescind any part of the national rule governing payday, vehicle title, and certain high-cost installment loans, Human Rights Watch said yesterday in a letter to Kathy Kraninger, the agency’s director. In February 2019, the agency proposed to roll back parts of the rule governing short-term, high-interest loans finalized in 2017, particularly requirements on lenders to ensure that borrowers have the ability to repay loans before issuing them.

Payday and other types of short-term and small-dollar loans often carry exorbitant interest rates. This can make repayment difficult for borrowers, many of whom live paycheck to paycheck. Borrowers who cannot afford to repay a loan in full may fall into a “debt trap,” needing to take out another loan with additional fees, creating a cycle of compounding costs and growing repayment periods.  People can lose their cars or other assets or sacrifice basic needs when this happens.

“Reasonable regulations that prevent predatory lending practices are essential to keep people out of crushing and inescapable debt,” said Arvind Ganesan, business and human rights director at Human Rights Watch. “The Consumer Financial Protection Bureau developed these regulations after rigorous, nationwide research and an in-depth consultation process and should put them into effect without delay to help protect the country’s most vulnerable people.”

In the letter, Human Rights Watch presented research on the negative impact of predatory payday loans on Native Americans living on reservations in South Dakota and New Mexico. In a survey of nearly 400 people, Human Rights Watch found that payday loans are difficult to repay for the majority of the borrowers who responded and cause problems for covering household expenses. About a third of the borrowers who responded reported serious consequences as a result of their payday loan, including threats of criminal charges by debt collectors, eviction, and loss of employment.

Posted: January 1, 1970, 12:00 am

Dear Ms. Kraninger,

We write to express our deep concern with the Consumer Financial Protection Bureau’s (CFPB’s) proposal to rescind certain provisions of the rule governing Payday, Vehicle Title, and Certain High-Cost Installment Loans, particularly those provisions requiring an assessment of a possible loan recipient’s ability to pay.[1] The rule’s finalization in 2017 was a significant and necessary step forward in protecting the millions of Americans subject to predatory high interest loans that, by design, often lead low-income borrowers into cyclical debt traps.[2]

Now that the time is approaching for the 2017 rule to take effect, we urge you to consider the protections for consumers this rule provides. Rather than rescinding provisions of the rule, we strongly encourage the CFPB to fully implement the 2017 rule as originally planned.

According to research by the Pew Charitable Trusts, approximately 12 million Americans take out payday loans and 2.5 million take out vehicle-title loans each year.[3] The short-term nature of these loans and their repayment structure drive about 80 percent of borrowers to re-borrow frequently and repeatedly pay fees to refinance their accumulated debt.[4]  The 2017 rule establishes logical baselines for consumer protection, including by requiring lenders to verify that borrowers have the ability to repay the loan and its associated fees prior to issuing a loan.

The CFPB rule, and specifically the mandatory underwriting requirements for making ability-to-pay determinations, found broad bipartisan support. A 2017 poll conducted by Lake Research Partners and Chesapeake Beach Consulting on behalf of Americans for Financial Reform and the Center for Responsible Lending found that 73 percent of likely American voters from across the political spectrum supported this provision and other regulations included in the CFPB rule.[5] This went up to 79 percent in a 2018 poll.[6] Widespread support is in part due to American voters recognizing the strong connection between financial regulation and its beneficial impact on their lives. While the rule’s implementation would benefit Americans across the country and of different demographics, it is crucial to note that predatory lenders disproportionately target and consequently harm low-income minority communities.[7]

Human Rights Watch has investigated the impacts of predatory payday lending in some of the poorest parts of the United States such as Native Americans reservations, specifically the impacts on people living on Cheyenne River and Pine Ridge Reservations in South Dakota, and Laguna and Zia Pueblos in New Mexico. In 2012 we surveyed 387 individuals living on reservations, in financial literacy classes, in pow-wows, and with the help of financial institutions, who distributed the surveys for us. The survey methodology was not random and therefore not representative, but the results paint a worrying picture of the negative impacts of payday lending.

The vast majority, around 73 percent, of survey respondents reported household incomes under US$40,000, with an average of two children each, and nearly half had taken out a payday, auto title, or both types of short-term loans. People reported taking out loans most often to cover unexpected expenses, but also for their everyday expenses and groceries. More than half of those who took out a loan said they had trouble repaying their loans and associated fees.[8]

Over 70 percent of borrowers found that the loan repayment process made covering regular household expenses more difficult, and the difficulty increased if they took out more than one loan per year.[9] Alarmingly, about one-third of respondents reported specific negative experiences related to their loans, like threats of criminal charges by aggressive debt collectors, car repossession, eviction, or loss of employment. The additional financial difficulties many low-income Native American reservation families face during the repayment process expose the predatory nature of an unregulated payday loan industry. The ability-to-repay provision included in the 2017 CFPB rule as finalized helps ensure that consumers would not have to choose between repaying loans or meeting basic expenses. It would also prevent the cascade of potentially negative repercussions when a person is unable to repay a loan.

About a quarter of the survey respondents were from Cheyenne River Sioux Reservation in South Dakota. At the time we conducted our research, 50 percent of adult workers on Cheyenne River were unemployed or out of the workforce.[10] Residents could not access payday loans on the reservation, and so would often drive long distances to Pierre or Rapid City to take out loans from lending storefronts, often with triple- or even quadruple-digit interest rates. Such high-cost payday loans are often the only source of credit for many Native Americans living on reservations. Human Rights Watch’s research on Cheyenne River and other reservations shows that a disproportionate number of people living on reservations within the United States depend on short-term loans to meet unexpected expenses.

In a positive development in 2017, South Dakota implemented an interest rate cap of 36 percent for short-term loans.[11] New Mexico followed in 2018 with a 175 percent interest rate cap on small loans of less than $5000.[12] While this has curbed some of the negative impacts from exorbitant payday interest rates, local news has reported that this may be driving consumers to use unregulated online lenders.[13] This further highlights the need for robust federal rules and oversight that would not allow for regulatory gaps or loopholes that could again trap low-income individuals in debt that they cannot afford to repay.

While regulation alone will not lift low-income people who borrow payday loans out of poverty or low-income status, it is a crucial first step towards protecting their families and preventing them from falling into cyclical financial crisis and debt.  By fully implementing the rule as finalized in 2017, the CFPB would take a vital first step towards holding predatory lenders accountable and making sure that consumers the agency is mandated to protect are able to access short-term loans without risking months of further financial instability. 

We would be happy to provide additional information, and also welcome the opportunity to further discuss this issue with representatives from your agency. If you would like to arrange such a meeting, please contact Namratha Somayajula (somayan@hrw.org).

 

Sincerely,                                                                  

Arvind Ganesan 

Director 

Business and Human Rights

                                  

Komala Ramachandra

Senior Researcher

Business and Human Rights

 

 

[1] Bureau of Consumer Financial Protection, RIN 3170-AA80, February 14, 2019, https://www.govinfo.gov/content/pkg/FR-2019-02-14/pdf/2019-01906.pdf (accessed April 25, 2019) 12 CFR Part 1041 [Docket No. CFPB-2019-0006].

[2] “CFPB Finalizes Rules To Stop Payday Debt Traps,” Consumer Financial Protection Bureau news release, October 5, 2017, https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-st... (accessed April 25, 2019).

[3] Pew Charitable Trust, “Payday Loan Facts and the CFPB’s Impact,” January 14, 2016, https://www.pewtrusts.org/en/research-and-analysis/fact-sheets/2016/01/p... (accessed April 25, 2019).

[4] “CFPB Finalizes Rules To Stop Payday Debt Traps,” Consumer Financial Protection Bureau news release, October 5, 2017, https://www.consumerfinance.gov/about-us/newsroom/cfpb-finalizes-rule-st... (accessed April 25, 2019).

[5] “New Poll Reveals Strong Bipartisan Support for Financial Regulation; Americans Say Wall Street’s Influence in Washington is Too High,” Lake Research Partners and Chesapeake Beach Consulting joint press release, July 18, 2017, http://www.lakeresearch.com/images/Press_Releases/4LRPpublicmemo.AFR.CRL... (accessed April 25, 2019).

[6] “New Poll Shows Voters Oppose Mulvaney Policies at CFPB,” Americans for Financial Reform and Center for Responsible Lending joint press release, July 31, 2018, https://ourfinancialsecurity.org/2018/07/afrcrl-poll-new-survey-reveals-... (accessed April 25, 2019).

[7] Graciela Aponte-Diaz, “State Research Shows That Payday Lending Stores are Heavily Concentrated in African American and Latino Communities Across California,” Center for Responsible Lending media, December 9, 2016, https://www.responsiblelending.org/media/state-research-shows-payday-len... (accessed April 25, 2019).

[8] Human Rights Watch, Payday Lending Survey Data (Cheyenne River and Pine Ridge Reservations in South Dakota, and Laguna and Zia Pueblos in New Mexico), July-November 2012.

[9] Human Rights Watch, Payday Lending Survey Data (Cheyenne River and Pine Ridge Reservations in South Dakota, and Laguna and Zia Pueblos in New Mexico), July-November 2012.

[10] Arvind Ganesan, “Predatory Lending and Indian Country,” commentary, Human Rights Dispatch, September 24, 2013, https://www.hrw.org/news/2013/09/24/predatory-lending-and-indian-country.

[11] Liz Farmer, “Facing 652% Interest Rates, South Dakota Voters Regulate Payday Lending,” Governing, November 9, 2016, https://www.governing.com/topics/elections/gov-south-dakota-payday-lendi... (accessed April 25, 2019).

[12] Statement of Rules Changes Related to Licensees under the Small Loan Company Act of 1955 (SLA) and Changes Made from the Proposed Rules to the Final Adopted Rules, New Mexico Regulation and Licensing Department Financial Institutions Division, September 15, 2018, http://www.rld.state.nm.us/uploads/files/FID%20Statement%20of%20Small%20... (accessed April 25, 2019).

[13] Bart Pfankuch, “Payday loans gone, but need for quick cash remains,” South Dakota News Watch, March 18, 2018, https://www.sdnewswatch.org/stories/payday-loans-gone-but-need-for-quick... (accessed April 25, 2019); Casey Wonnenberg, “Company Says It’s Filling a Need After Payday Lenders Close,” Keloland, February 1, 2019,  https://www.keloland.com/news/your-money-matters/company-says-it-s-filli... (accessed April 25, 2019).

Posted: January 1, 1970, 12:00 am

(London) – Clothing and footwear brands should end business practices that provide incentives for factory labor abuses, Human Rights Watch said in a report released today.

The 66-page report, “‘Paying for a Bus Ticket and Expecting to Fly’: How Apparel Brand Purchasing Practices Drive Labor Abuses,” identifies key practices by clothing companies that fuel abusive cost-cutting methods by factories that harm workers. Many global brands tout their commitment to ensuring rights-respecting workplaces in the factories that produce their goods, but undercut their efforts with relentless pressure on suppliers to drive down prices or produce faster, Human Rights Watch found. Many suppliers respond to those pressures with abusive cost-cutting methods that harm workers. One factory owner ruefully summarized the problem, saying that brands are “paying for a bus ticket and expecting to fly.”

“Apparel brands that drive their suppliers to cut costs in ways that harm workers are always a whisker away from human rights disaster,” said Aruna Kashyap, senior counsel in the women’s rights division at Human Rights Watch. “Clothing brands need to monitor and rectify their business practices so they don’t encourage the very factory-level abuses they say they are trying to stamp out.”

Human Rights Watch interviewed workers in Bangladesh, Cambodia, India, Myanmar, and Pakistan, as well as garment suppliers from South and Southeast Asia; experts who had at least a decade’s experiencing identifying and placing orders for brands with factories; and other industry experts.

The sixth anniversary of the April 24, 2013 Rana Plaza tragedy in Bangladesh – where an eight-story building collapsed on the outskirts of Dhaka, killing 1,138 workers and injuring over 2,000 – is a chilling reminder of the risks apparel brands need to guard against.

Apparel brands typically have their products made in a broad array of factories across multiple countries. This makes their efforts to monitor conditions in those factories inherently daunting and complicated. Complex purchasing decisions underpin the production of every branded product. Every one of these decisions can have an impact – positive or negative – on how suppliers treat their workers.  

Factories respond to poor practices by clothing brands with abusive cost-cutting methods, including illicit subcontracts with facilities with rampant workplace abuses. The other abuses include wage violations, requiring workers to work faster and without adequate breaks, and dangerous or unhealthy work conditions.  

Fawzia Khan, a 24-year-old unmarried woman worker from a factory in Pakistan, described the relentless pressure on workers to produce faster saying:

I hate the jail-like atmosphere at the workplace, the ban on going to the bathroom, the ban on getting up to drink water, the ban on getting up at all during work hours.... And the one hour that we are supposed to get off during the day is actually only half an hour in practice. I don’t remember the last time I got a full one-hour break.

Video

5 Business Practices Many Major Clothing Brands Use that Hurt Workers

Apparel brands that drive their suppliers to cut costs in ways that harm workers are always a whisker away from human rights disaster. Clothing brands need to monitor and rectify their business practices so they don’t encourage the very factory-level abuses they say they are trying to stamp out.

Brands often struggle to effectively monitor workplace conditions across their sprawling global supply chains. Many exacerbate that problem by refusing to map and disclose their supplier factories – a lack of transparency that makes it much harder for monitoring groups to identify abuses that brands own efforts fail to detect. And some brands use agents to identify factories for their products, without insisting on knowing factory locations, workplace conditions, and pricing practices.

The marketplace requires clothing brands to produce and sell goods faster than ever, in response to changing consumer demands. But brands risk fueling labor abuses if they shrink the time available to workers to make their products without adequately monitoring the factory’s capacity or giving workers adequate time that factors in national holidays and weekly rest days, Human Rights Watch found.

Brands that do not have written contracts, or use one-sided contracts without allowing for flexible delivery dates and waiving financial penalties in cases where brands contribute to delays significantly heighten risks to workers. Where contracts are one-sided, brands seek to transfer the costs of their own mistakes entirely to factories, heightening the use of abusive cost-cutting methods by factories. Companies that do not pay their suppliers on time risk delays for workers in receiving their wages and benefits, and hamper factories’ abilities to take loans to finance fire and building safety measures. The UK Prompt Payment Code, a voluntary code, provides an example of good practice. 

The report identifies key steps apparel brands should take to correct poor purchasing practices and mitigate the risks of supply chain abuses. Brands should adopt and publish policies on responsible sourcing and integrate them across all departments. They should publish lists of their factories in accordance with the Transparency Pledge, a minimum standard developed in 2016 by a coalition of labor and human rights organizations. They should re-evaluate their use of purchasing agents and make sure their contracts with suppliers are written and fair.

Brands should participate in surveys like Better Buying, which allow suppliers to rank brands’ purchasing practices and report where they stand in the results; use sophisticated labor costing tools that account for the costs of labor and social compliance, like those developed by the Fair Wear Foundation; and participate in initiatives that combine collective brand reform on purchasing practices with sectoral collective bargaining agreements, like the ACT (Action, Collaboration, Transformation) initiative. They should report publicly on the numbers of unions and collective bargaining agreements in their suppliers and on steps they take to improve purchasing practices that affect factory operations.

Governments should introduce laws making human rights due diligence in companies’ global supply chains mandatory, and these laws should also include measures to monitor and rectify their business practices.

“Consumers should not let brands claim credit for merely having policies on paper, or joining initiatives with lofty goals, unless they are transparent about the results,” Kashyap said. “What’s urgently needed is for companies to show consumers, investors, workers, and labor advocates what they have done to change poor purchasing practices.”

Selected Quotes

“The pressure on sourcing teams and buyers is always about finding a better [lower] price [for production at a factory]. …What isn’t done is the active connection of the risk of pushing in one place [price] and the result comes to bear in another place [factory working conditions]. That’s about business model.”
– Industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for multiple brands, London, January 15, 2019. 

“There is no price negotiation. There are just too many options [other suppliers] for them…. It’s like buying eggs for them [brands].”
– Supplier from Pakistan who requested anonymity, June 2018.

“It’s cheaper for me to get workers to do overtime work and try and meet the delivery date for shipment than be delayed and pay for flight costs.”
– Officer who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018. 

“Workers might have to do OT [overtime] because of orders. It could be that we accept orders with delivery dates but not have all the approvals for style, sample, etc. And in that process, our delivery date gets squeezed. Then we have to do what we can to meet the delivery date. Some companies [factories] are smarter and calculate what costs more – OT or air fare.”
– Supplier from Pakistan who requested anonymity, June 2018.

“One of the agents sets a flat 10 rupees (US$0.14) per piece. It doesn’t matter whether the entire garment costs 50 rupees ($0.72) or 500 rupees ($7.20).”
– Supplier from India who requested anonymity and was speaking of the “commissions” that agents charge suppliers, September 2018.

“If a brand says [to a factory] they are going to order 150,000 pieces and then at the time of actually placing the order, turn around and ask for 250,000 pieces, then you are going to have OT [overtime] or subcontracting.”
– Sourcing expert with more than 30 years of industry experience who requested anonymity, US, October 2018 and January 2019.

Posted: January 1, 1970, 12:00 am

 

Summary

Soon after the Rana Plaza collapsed in 2013 in the outskirts of Dhaka, Bangladesh, killing over a thousand workers, a top official from a global brand flew into Pakistan.[1] His sudden trip was sparked by the desperation to make up for orders his company had placed, and lost, with a factory destroyed in the Rana Plaza disaster. He concluded a business deal with a new Pakistani garment supplier and flew out within hours. Usual factory onboarding procedures were discarded. The fact that the global brand had previously rejected the supplier for “failing” social audits (inspections to check working conditions) did not matter. The brand’s business needs trumped workers’ rights. Lamenting the duplicity of the brand, a Pakistani garment supplier who followed this transaction and narrated its details to Human Rights Watch, said, “All this because he [the global brand representative] had to make up the order placed at Rana Plaza—and all ethics went out of the window. Everybody is like that.”[2]

The Rana Plaza disaster was a wake-up call to the world—1,138 workers died and over 2,000 were injured. It shone a light on the problem of death trap factories and poor government oversight. It also revealed much about how apparel brands do business and about their commitments to workers’ rights.

The nature of the apparel business is such that brands need to pay attention to market trends and consumer preferences that can change with dizzying speed. With the tremendous growth of online shopping, experts say global brands’ ability to churn out products quickly is key to success.

A maze of decisions underpins the development of each product before it hits the shelves. From forecasting consumer demand and planning; sales and marketing; designing products; selecting factories for manufacturing, monitoring them for social and labor compliance; and placing orders with and paying suppliers, numerous departments within a brand are involved in decision-making. Alternatively, some parts of these decisions may be made through agents. This complex web of decisions is generally referred to as a brand’s sourcing and purchasing practices.

This report is based largely on interviews with garment suppliers, social compliance auditors, and garment industry experts, including those with at least a decade’s experience sourcing for numerous global brands; hundreds of interviews with workers; and trade export data analysis for key producing markets from Asia. The report argues that brands’ poor sourcing and purchasing practices can be a huge part of the root cause for rampant labor abuses in apparel factories, undercutting efforts to hold suppliers accountable for their abusive practices. Because brands typically have more business clout in a brand-supplier relationship, how brands do business with suppliers has a profound influence on working conditions.

Brands can and should balance the twin goals of responding to consumer demands and protecting workers rights in factories that produce for them. This can only happen if they invest in a variety of human rights due diligence tools also needed to monitor and rectify their sourcing and purchasing and adopt key industry good practices. These steps will go a long way in discharging brands’ responsibilities articulated in the UN Guiding Principles on Business and Human Rights (UN Guiding Principles) and the Organisation for Economic Co-operation and Development Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector (OECD Due Diligence Guidance on Garments).

Poor Sourcing and Purchasing Practices

Low purchase prices and shorter times for manufacturing products, coupled with poor forecasting, unfair penalties, and poor payment terms, exacerbate risks for labor abuses in factories. Often, bad purchasing practices directly undermine efforts brands are making to try to ensure rights-respecting conditions in the factories that produce their wares. They squeeze suppliers so hard financially that the suppliers face powerful incentives to cut costs in ways that exacerbate workplace abuses and heighten brands’ exposure to human rights risks. Many brands demand their suppliers maintain rights-respecting workplaces, but then incentivize them to do the opposite.

Prices brands pay suppliers can undercut factories’ ability to ensure decent working conditions. In 2016, an International Labour Organization (ILO) global survey of 1,454 suppliers across different sectors revealed that 52 percent of apparel suppliers said brands paid prices lower than production costs. An industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for multiple brands, told Human Rights Watch: “The pressure on sourcing teams and buyers is always about finding a better [lower] price [for production at a factory]. There are few times when the question is asked, ‘Well, if we do this, will we have compliant production?’” Suppliers who spoke to Human Rights Watch felt brands did not negotiate costs. Some raised concerns that brands do not even cost for increases in legal minimum wages. Suppliers and industry experts also raised concerns about heightened pressures where brands used agents to place orders.

The amount of time a brand gives a factory to produce its goods impacts the factory and its workers. One supplier told Human Rights Watch:

We are getting pushed more and more to reduce our lead times. Sometimes we have to confirm some short lead times without any security [buffer] in sight or any tolerance by the brand. If we don’t agree to the lead times, we might lose the order.

The 2016 ILO supplier survey revealed that only 17 percent of respondents across different sectors (not just apparel) believed they had enough lead time to produce goods.

Brands can exacerbate time pressures with poor forecasting, delays in providing necessary order specifications or approvals, and sudden changes to order volumes, throwing off a factory’s ability to plan regular and overtime work for its workers. The Better Buying Purchasing Practices Index for 2018, a third-party index developed based on anonymous supplier surveys, revealed that many delays occurred in the pre-production phases; respondents said that only about 16 percent of buyers (brands) met all agreed-upon deadlines in the product development and pre-production stages.

Brands can and should take fair responsibility for delays they cause. If they do not, and suppliers are left to absorb these costs on their own, it is often the workers who lose out and suffer most. Examples of brands that take fair responsibility for delays include those that have flexible delivery schedules, pay for air freight to transport products faster, or waive financial penalties. A combination of a brand’s manufacturing terms and management decisions influence how its representatives identify and take responsibility for brand mistakes. Detailed, written manufacturing contracts are not an industry norm. Where they do exist, they are often one-sided—many brands assume no written responsibility for delays or other mistakes made by them. Experts say that in some cases, unscrupulous brands unfairly charge discounts and penalties to suppliers as a way of cutting their own costs, knowing that suppliers do not have much leverage to push back.

Finally, brands often unreasonably delay payment to suppliers for the work that they do. The United Kingdom Prompt Payment Code, a set of voluntary standards and payment best practices, is a good example of the kind of approach businesses and regulators can take to stamp out such practices.

Key Labor Abuses

Brand approaches to sourcing and purchasing are not merely a threat to a factory’s financial bottom line. They incentivize suppliers to engage in abusive labor practices and in risky contracting with unauthorized suppliers as a way of cutting costs. This means that brand practices in these areas directly undercut their own efforts to insist on rights-respecting working conditions across their supply chains. Human Rights Watch spoke with seven auditors, each of whom had between five and twenty years of experience conducting social audits. Almost all said they felt they were not witnessing enough improvements in working conditions in factories, in part because the prices paid by brands for garments were too low, let alone supporting factories to remediate non-compliant practices.

It bears emphasis that the primary responsibility for abusive workplace conditions lies with suppliers themselves. But if apparel brands are genuinely committed to rooting abuses out of their own supply chains, they need to do everything within their power to ensure that their own business practices prevent and discourage, rather than incentivize, supplier abuses.

Even though some brands appear to be moving in the right direction, overall brand purchasing practices have proved to be intractable problems and continue to impact labor rights adversely, especially in relation to workers’ wages and working hours, and their contracts. Many factories are often hostile to unions and collective bargaining—key vehicles for improving workers’ wages and benefits—and this hostility is further deepened in an environment where brands do not use costing tools to account for the financial implications of labor and social compliance.

Overtime-related violations are an open industry secret. Factories hide the number of hours workers actually work to pass compliance audits and find innovative ways of bypassing overtime wage regulations. In Myanmar, for example, workers described how factories had “stolen minutes” from them. To avoid paying overtime wages, their “hourly” production targets were recalibrated where each “hour” was 45 or 5o minutes. In India, workers from a factory described how the factory compelled them to use up some of their paid leave during the factory’s low production season instead of paying overtime wages.

Similarly, factories often resort to casual contracts for workers to cut costs or in response to variations in brand orders. In Pakistan, for example, suppliers that Human Rights Watch spoke with said they were under tremendous price pressures and that many brands followed a price-bidding system. This intense price pressure creates an environment that allows abusive cost-cutting practices to thrive, rather than firmly arresting them. Factories hired workers through contractors to avoid making social security and pension contributions that would otherwise be legally required—a key cost-cutting strategy. In Cambodia, factories repeatedly use short-term contracts in excess of legally permissible limits, citing seasonal variations in brand orders.

In order to cut overtime costs, factories try to extract more work from workers using fewer minutes or hours. Human Rights Watch has consistently heard accounts of workers from different countries—Cambodia, Bangladesh, India, Myanmar, and Pakistan—about the pressure to work faster and without breaks. Some common methods of getting workers to produce more include restricting workers’ toilet breaks; trimming their meal breaks; squeezing “trainings” into lunch or other rest breaks so the “production time” is not lost; disallowing drinking water breaks and other rest breaks. The pressure to work faster has a gendered impact, especially given women workers’ needs for additional toilet or rest breaks during menstruation. Pregnant workers from different countries have told Human Rights Watch that they have found themselves targeted as “unproductive.” Workers have also recounted how line supervisors or other managers hurl verbal abuses at them to humiliate them and make them work faster.

Outsourcing production to smaller, low-cost units without brand permission is another method used by factories to cut production costs or meet production deadlines. Industry experts privy to unauthorized subcontracts told Human Rights Watch that brands purchasing practices can drive such outsourcing. They identified poor forecasting, brands’ failure to monitor factory capacity, the use of buying agents, absence of ordering time tables, last minute design changes, and poor prices among the purchasing practices deficits that catalyzed factories’ use of unauthorized subcontractors.

A prime example of growing unauthorized subcontracting is Cambodia. Even though statutory minimum wages went up, EU and US trade data shows that nominal apparel prices paid by international apparel brands for the top five products manufactured in Cambodia (by value) mostly dropped between 2014 and 2017 whereas in the same period, the government raised the monthly basic wage (that is without adding mandatory allowances) from US$100 to $153. Between 2014 and 2016, the ILO documented a spurt in the number of subcontractor factories from 82 to 244.

In 2016, Human Rights Watch physically mapped 45 subcontractor factories in Cambodia’s Kandal province with the help of workers. This was in addition to a few other subcontractor factories Human Rights Watch saw in Phnom Penh. Most of these factories were unmarked, making it difficult to even detect that the building housed a factory. In the few factories from where Human Rights Watch was able to interview workers from these subcontractor factories, Human Rights Watch found that the working conditions were worse: workers were hired on a casual basis on piece-rate wages, did not receive other legal benefits, and worked in factories without any health clinics.

Sourcing experts that Human Rights Watch spoke with, as well as suppliers, identified a combination of purchasing practices that further drove such factory practices. These include prices that do not adequately factor in labor costs, poor forecasting, huge departures from the projected volume of orders, delays in brands’ technical packs (documentation that provides complete information needed to make a product, including construction graphics and measurements, materials, sizing information) and approvals needed to begin bulk production.

Factories under price pressure also do not invest enough in making fire and building safety improvements. How brands do business with them influences their loan eligibility even where they want to make improvements. A study by the International Finance Corporation in Bangladesh underscored the links between brand purchasing practices and fire and building safety. Factories’ loan eligibility to make these financial investments was influenced by their ability to show strong business relationships and good cash flow, which directly depended on brand purchasing practices. The Bangladesh Accord on Fire and Building Safety specifically stipulated that brands have the responsibility to facilitate financing for remediation. Experts believe this resulted in a few brands using their purchasing practices to support financing factory repairs, but otherwise, did not bring about significant reforms on the purchasing practices front for all member brands.

Moreover, a range of other occupational health and safety concerns, including factories installing sufficient cooling mechanisms to maintain ambient working conditions, also depends on factories’ ability to make the necessary financial investments. Workers have described to Human Rights Watch the challenging circumstances under which they work, which hints at the cost-cutting methods used by factories. For example, workers have described dripping in sweat and working in unbearable heat levels, and with inadequate air circulation because of fewer fans or fans that just circulate hot air in a closed space.

Key Features of Effective Human Rights Due Diligence on Purchasing Practices

Brands have a responsibility to take measures to identify and stop, prevent, and mitigate risks that cause or contribute to human rights problems in their supply chains.

Brands—large and small—truly committed to workers’ rights should adopt and publish a policy on responsible purchasing practices and embed this across all internal departments through standard operating procedures, trainings, key performance indicators, and incentives tied to measures on social and labor compliance in factories.

Internal integration of policy should be combined with comprehensive contractual reform. Such reforms should ensure that contracts with suppliers accurately outline brand responsibilities to factor in labor and social compliance costs and production times. Contracts should outline brand responsibility to provide the supplier with complete and accurate technical details, brand approvals, consequences of brand delays, and business incentives for factories that comply with labor laws and collective bargaining agreements. This kind of contractual reform will help mitigate the power imbalance between brands and suppliers by transposing brand commitments into contracts. It will also help mitigate brands’ exposure to heightened human rights risks arising from brand actions and omissions, and allow a brand to demonstrate through legal certainty for its suppliers that it is committed to assuming a fair share of its responsibility to prevent or mitigate human rights risks in factories.

Brands should combine such policy and contractual reform with participation in emerging human rights due diligence initiatives. At time of writing, there are three promising initiatives that can aid brands’ human rights due diligence on purchasing practices.

One is Better Buying’s anonymous supplier surveys of brands’ purchasing practices. Better Buying provides industry-wide information while allowing brands to seek tailored reports to help them track their progress using key indicators on purchasing practices. Brands should participate in third-party surveys like Better Buying and publish a summary of the tailored results they receive.

The second are initiatives that seek to combine collective brand action on reforming purchasing practices with sectoral collective bargaining like the Action, Collaboration, and Transformation (ACT) on Living Wages, which is focusing its work in a few key priority countries. Such collective initiatives hold the promise of enhancing brand leverage in shared factories and undercutting supplier competition. Brands should join collective initiatives like ACT. While waiting for initiatives like ACT to successfully conclude sectoral collective bargaining agreements, brands should take measures to at least track, and bolster through business incentives, their suppliers’ respect for workers’ freedom of association and collective bargaining.

The third is a set of labor costing tools developed by the Fair Wear Foundation for all 11 countries they operate in. Brands that do not have sophisticated costing tools that allow them to delineate the labor and social compliance costs at the factory level, should use costing tools like the ones developed by the Fair Wear Foundation.

Finally, brands should regularly publicly report on how their purchasing practices are improving and working to support social and labor compliance in factories using specific indicators. These indicators on sourcing and purchasing practices should be developed along the lines of those suggested in the OECD Due Diligence Guidance on Garments and build on indicators developed by organizations, including the Fair Wear Foundation and the New York University (NYU) Stern Center for Business and Human Rights.

There is a growing movement of conscious consumers and investors who care not just about trends and profits, but also about the workers who make their clothes. Brands should show and explain how they are cleaning up their own house on sourcing and purchasing practices while calling for workers’ rights to be protected in factories.

 

Methodology

This report is based largely on in-depth Human Rights Watch interviews—sometimes multiple interviews—with 35 garment suppliers, social compliance auditors, and apparel industry experts between April 2018 and January 2019. The apparel industry experts included those with at least a decade of experience overseeing sourcing and purchasing for global brands. The report also draws on previous Human Rights Watch research that entailed interviews with about 500 garment workers in Cambodia, Bangladesh, and Pakistan between 2013 and 2018, and an additional 46 garment worker interviews in Myanmar and India in 2018. It also draws upon a November 2018 workshop hosted by Human Rights Watch with 13 experts who have researched sourcing and purchasing practices, including specialists on labor costing. A review of relevant secondary literature, including export data analysis, also informed this report.

The report does not focus on any one country or brand. It speaks to industry-wide problems that impact labor and social compliance by factories.

When interviewing garment suppliers, Human Rights Watch did not seek any information about specific brands they were supplying or detailed information about product types. This was done in order to satisfy interviewees’ need for anonymity, so they could participate in interviews without putting their business relationships at risk. In some instances, Human Rights Watch has chosen to withhold product details that interviewees provided to further guard against any possibility of reprisals. The suppliers who spoke to Human Rights Watch were mostly producing for international apparel brands.

Unless otherwise noted, events and stories described by suppliers are recent, that is, having occurred between 2016 and 2018. In cases where an example cited predates that range, this is noted in the report.

I. Background: The Perils of Fashion

In early February, the Chinese ushered in the Lunar New Year of the Pig. Peppa Pig, the protagonist of a British animated children’s TV cartoon show, joined the celebrations. She found her way on all kinds of merchandise, including adult t-shirts.[3]

Apparel brands face tremendous commercial pressure to make their product lines responsive to rapidly changing cultural trends, consumer preferences, holidays, and seasonal shifts.[4] The work that goes into making that happen is multifaceted—choosing a sales and marketing strategy, designing a product, projecting consumer demand, setting prices, identifying factories that can manufacture the product, placing orders, and having them lined up and ready to sell before the moment passes.

Speed, increasingly, is key. E-commerce and the use of other technology has transformed the apparel industry, bringing into sharp focus “speed to market.”[5] A 2018 report by McKinsey analyzed the reasons why top global apparel brands are profitable. McKinsey highlighted two key factors about these companies’ operations. First, they used data analytics and consumer feedback early on to develop products and second, they made speed to market a top priority and got “faster and faster.”[6] According to McKinsey, high-performing companies delivered products to consumers within six to eight weeks, compared with the industry average of about 40 weeks.[7]

Brands looking to compete on these terms face many challenges. Among the most daunting is their need to manage their sprawling, complex global supply chains. Global apparel brands typically source from scores of factories they do not own or directly control, in multiple countries, sometimes thousands of miles from their own headquarters or target markets.

Putting that machinery into motion requires a complex and coordinated effort—one that requires planning and forecasting, design and development, sourcing, costing and cost negotiation, the setting of payment terms with suppliers, and the alignment of all this to brands’ commitments on social and labor compliance in supplier factories.[8] Together, this complex set of processes is usually known as “sourcing and purchasing practices” in the apparel industry. 

Industry experts believe that going forward, apparel companies should be diversifying their risks by creating nimble supply chains.[9] But the demand to be nimble, fast, and responsive to the consumer also creates pressures that carry serious risks.

As this report describes, brands’ sourcing and purchasing practices often undermine and stand in tension with their stated commitments to ensuring safe and dignified conditions for the workers who produce their wares. The ever-mounting pressure to work faster exacerbates those problems. Instead of holding suppliers accountable for their abuses, these tensions incentivize them and heighten brands’ exposure to serious human rights risks.

For more than a decade, labor advocates and industry experts have pointed to the skewed power relations between brands and suppliers, arguing that brands’ poor sourcing and purchasing practices contribute to negative impacts on labor compliance in their supplier factories.[10]

In global supply chains, international brands usually have more negotiating power than their suppliers.[11] Brands are often in a position to dictate the price they will pay to suppliers, the time within which suppliers should make products, and other purchasing terms.

Brands make these decisions in an environment where not only they are competing, but suppliers too are competing to get brand orders. Unless all brands sourcing from the same factory assume a fair share of their human rights due diligence responsibility, there is not just a risk of free-riders, but also the additional human rights risk to a brand because it has limited leverage to sustainably influence factory working conditions. Brands that do not co-operate with other brands to assume their fair share of responsibility to reform sourcing and purchasing practices, expose themselves to continuing human rights risks instead of acting swiftly to help workers. Where brands simply cut their supplier relationship and quietly exit when labor abuses come to their attention, their sourcing and purchasing practices are not aligned with the principle of responsible exit.

At the supplier level, stiff price competition amongst each other means that suppliers committed to decent working conditions and accurately costing for them carry the risk of brands switching to other “cheaper” suppliers who slash social and labor compliance costs to stay competitive.

Against this backdrop, over the last few years, the momentum to reform brand purchasing practices has been slowly building. Supply chain experts, academics, labor advocates and global unions, the ILO (which runs a factory monitoring program called Better Work), multi-stakeholder initiatives (organizations comprising of brands and nongovernmental organizations (NGOs)), and brands themselves have increasingly spotlighted poor sourcing and purchasing practices and called for reform.

At the same time, though, the ever-increasing demands of the global marketplace are putting new pressures on brands that risk reinforcing bad practices and undercutting hard-won progress. In this sense, the industry stands at a real crossroads—one where there is both real momentum towards positive change, and a dangerous current of commercial pressure pushing in exactly the opposite direction.

II.  Key Brand Sourcing and Purchasing Practices That Contribute to Labor Abuses

Major apparel brands have adopted codes of conduct and other policies aimed at ensuring their suppliers guarantee safe conditions and rights-respecting terms of employment for the workers who produce their wares.[12] At the same time, though, many brands’ purchasing practices are driven by a relentless focus on speed and cost. The net result of these countervailing practices is that while many brands are demanding better workplace conditions, at the same time they are squeezing suppliers in ways that not only undercut suppliers’ ability to comply but incentivize workplace abuses.

Brand Price Negotiations 

“The [number of] compliances [for factories] keep moving up and the prices keep going down.”
―An official from a group that owns apparel factories in several Asian countries supplying international apparel brands, Southeast Asia, May 2018.

The pressure on sourcing teams and buyers is always about finding a better [lower] price [for production at a factory]. There are few times when the question is asked, “Well, if we do this will we have compliant production?” … What isn’t done is the active connection of the risk of pushing in one place [price] and the result comes to bear in another place [factory working conditions]. That’s about business model.
―Industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for multiple brands, London, January 15, 2019. 

In 2016, the ILO published the results of a global survey that it conducted in collaboration with the Ethical Trading Initiatives of Denmark, Norway, and the United Kingdom. The survey results were based on responses of 1,454 suppliers across different sectors and revealed the following:

  • 78 percent of apparel suppliers said price remained the “main criterion” brands used when placing orders, while just 47 percent said working conditions were factored into the decision;[13]
  • 52 percent of apparel suppliers said prices paid were often lower than production costs;[14] 81 percent said they agreed to such terms to secure future orders.[15]
  • According to suppliers, 75 percent of buyers across different sectors (not just apparel) were unwilling to adjust prices when statutory minimum wages were raised. Suppliers said that even among willing buyers, there was on average a 12-week time-lag before they adjusted prices.[16]

The Better Buying Purchasing Practices Index, a new third-party index based on anonymous supplier ratings of brand sourcing and purchasing practices, revealed the following in 2018:

  • 60 percent of suppliers said they did not receive any incentives for complying with their buyers’ codes of conduct;[17] 
  • 55 percent of suppliers reported “high pressure” negotiating strategies;[18] 
  • Just 38 percent of suppliers said the prices they received were adequate to support compliant production;[19]
  • For 27 percent of suppliers, the buyers paid less than the amount finalized in the purchase order;[20]
  • Among buyers rated in late 2017, 31 buyers headquartered in Europe and the UK were ranked better for their costing practices than 31 based in North America.[21] 

Human Rights Watch spoke with suppliers who echoed these complaints. They also said they had almost no ability to negotiate prices brands paid them because of the stiff competition they faced in the industry.[22]

Suppliers interviewed by Human Rights Watch recounted intense pressure on pricing. One Pakistani supplier who supplies numerous global brands said that the brands “give us a target price and we have to meet it if we want to take the order.”[23] An official from another Pakistani group, with a vertically integrated business with multiple factories, about 70 percent of which supplied to international apparel brands, said he did not even think price discussions could be called “negotiations.” “There is no price negotiation. There are just too many options [other suppliers] for them…. It’s like buying eggs for them [brands].”[24] An Indian supplier described the pressure to reduce costs and contrasted them with brand demands regarding quality and compliance. He said: “There is a difference between the price of a bus ticket and a flight ticket. You can’t pay for a bus ticket and expect to feel like you are flying.”[25]

One Supplier’s Perspective

An official from a supplier group who oversees the group’s business and operations across its factories in several Asian countries, explained how international apparel brands he did business with had consistently sought to drive prices down over the last five years. Drawing upon his experience of negotiating business with 17-20 brands over several years, he said that “even with the same orders, repeat orders, even with smaller quantities, the prices go down—5 percent sometimes; maybe 2-5 percent. Even the same order, everything is same—this is a big issue for us.”[26] He noted that over the same period, statutory minimum wages had risen in several countries where the group owns factories.

He said brands tried to negotiate the price down by pressuring them to reduce cut-and-make costs, which is the part that includes workers’ wage bills. “Labor costs are under the CM price [cut and make price]. It’s not separated out. But if they think the price is too high, it’s always the CM—they want us to cut our CM price. It always happens.”

He said that some buyers are themselves reluctant to take account of suppliers’ cost breakdowns because they laid bare realities that they would prefer to remain ignorant of:

I have some friends who are big buyers for American brands and they know they will never get the target price if they use open costing [transparent costing]. They say for example $10 [per piece]. If you make an open calculation sheet and use time measurements for work—you need $12—you cannot get $10. They start with open calculation and then suddenly say, “We don’t want to see it [the costing sheet].”

In another example, where the same official was doing business with a global brand that was keen to pay workers a “living wage,” he said, “I made a living wage calculation and showed one of our biggest customers [brands] how he should change the price for me to pay the living wage. They said it was unrealistic.”

Not Factoring in Statutory Minimum Wages

A key concern that suppliers raised was that many brands do not factor increases to existing statutory minimum wages into their prices. One supplier from Pakistan who estimated that about 95 percent of their production is for US brands said that brand prices were not adjusted to accommodate the government’s increase of statutory minimum wages. Reflecting on his experience of doing business with long-term buyers, he said, “The impact on my payroll because of wages and social security [contributions] was 10-15 million [Pakistani rupees, roughly $70,609 to $105,913].”[27] Another large Pakistani supplier who manufactured for 12-15 American and European brands, said that some brands expected to be able to pay the same prices even when wages went up:

The problem arises when you have a similar or a repeat order. For instance, if … they place the same order each time, there we have to have this conversation. The Europeans are friendlier to these changes. The Americans, they say, “as good as your last shipment.”[28]

Shelly Gottschamer, an expert with more than two decades of sourcing experience, said that brands should pay suppliers prices that weave in statutory minimum wages. She said most brands should be negotiating seasonal costs at least a few times a year and “if there are labor increases that are either happening [at that time] or imminent, then there should be a conversation and a discussion about an increase in the minute rate that you are paying your suppliers.”[29] She further stated that fair increases to reflect impending minimum wage increases should be made by brands,

[U]nless a brand has its head in the sand, which comes down to the management practices and that really starts at the top. If you are a brand that says you care about social and labor conditions, most likely you are paying attention to the labor markets where you are doing business. Some brands just don’t and that’s really the problem.[30]

One former sourcing expert said that a brand’s leadership should change how business decisions are made by enabling buying teams to adjust prices to reflect legal minimum wages:

It’s entirely up to the leadership of the company. It is about enabling by the leaders and being thoughtfully connected to the implications of the business. Does anyone actually tell the CEOs, “By the way, boss, we buy 20 percent of our season from Bangladesh and the government has put its wage rates up. Strictly speaking we should be paying an extra $100,000 for our garments from Bangladesh for this season. But we are not going to, and that just probably means there are a bunch of workers in our supply chain who are not being paid minimum wage.[31]

Buying Agents

Some global apparel brands use buying agents to source their products—essentially, middlemen who identify and negotiate with suppliers on a brand’s behalf. Buying agents can play an important role for brands that do not have sourcing teams with the necessary language and geographical expertise to locate appropriate suppliers. Some buying agents may also provide additional services, such as warehousing, which allow suppliers to save costs.[32] But brands risk having little visibility over buying agents’ own business practices or those of the suppliers they work with unless they take specific measures to ensure transparency. For this reason, many industry experts say that global apparel brands’ use of buying agents presents a higher risk for poor sourcing and purchasing practices and workplace abuses.[33] Some experts have argued that brands should move away from any use of buying agents, as the only practical way to address those problems. Where brands use buying agents, they should demonstrate that they have a robust human rights due diligence mechanism specifically designed to address the additional risks presented by their use of buying agents, including any commissions and bribes that unscrupulous agents may charge factories, effectively reducing the total money the factory receives.

A former sourcing and compliance expert who worked for a North American retailer for over 10 years spoke about the challenges of using buying agents. When she began working for the company, she said that the company used the services of about 300 buying agents. They had very little visibility over their supply chain and estimated the agents used about 1,000 factories and potentially as many as 2,000 factories. “[The agents] had their network that was extensive and constantly changing. We were negotiating pricing without any visibility,” she said. She began a process of reducing the use of agents, cutting down from 300 to a handful of agents.[34]

When asked whether the brand had any information about the final price that was paid to the factory for production, she said that she had no information about this.

That’s the biggest challenge—we had no idea about the end price paid to the factories. When we started working directly with factories, that’s when we realized how much the agent was making. It’s more important to push for transparent costing with agents.[35]

Even though she did not have visibility over the actual price paid to factories producing for them via buying agents, she said that she did have some visibility over compliance in these factories because she was involved in social audits.[36] “The difference was night and day,” she said describing the labor conditions in factories that produced for the brand via a buying agent and factories that directly did business with the brand. “Through agents, that’s often when we find out they are producing on a rooftop, illegally, or there’s trash a meter-high blocking pathways. These factories also have transactional (casual) workers who come and go every day and they are paid cash.”[37]

Another expert with 20 years of experience sourcing for multiple multinational brands said that when she worked with buying agents, “ultimately knowing the supplier was very difficult.”[38] She explained further:

You lose control of not just compliance, you also lose control over visibility and pricing. If you get into a costing dialogue with the agent asking for [price] reduction, they can change the supply chain without telling you, to get the lowest price. And we won’t know about compliance and other things in those factories.… That’s why I tried to buy direct as much as possible.[39]

In addition to buying agents trying to maximize their profits by driving down prices, she also said that there were “hidden costs between agent and the supplier,” referring to kickbacks that unscrupulous agents can demand. “That’s common knowledge. There is no way to catch it. It is under the table and it is a dirty little secret. These hidden costs also present conflict of interest issues for agents. The agent is supposed to represent the brand. So, if he’s taking kickbacks from the supplier, then who is he really representing?” she said.[40] 

Another industry expert who has worked closely with factories in Bangladesh and other parts of Asia, as well as South America, reflected on his experience of looking at labor conditions in factories:

Working conditions in factories chosen by buying agents are worse. I’ve been doing this for 30 years now. [I] noticed that brands are getting away from buying agents big time…. You don’t go to an agent unless you have no clue about the market. The thing about labor agents for brands is that they do get them a cheaper price—they have a much stronger portfolio of factories. An agent who knows many different buyers will keep the factory busy all the time. [But] there’s a double payment. The labor agent takes a cut from the price and the working conditions are worse.[41]

An Indian supplier who worked with a brand’s buying agents described the “commissions” he had to pay: “One of the agents sets a flat 10 rupees ($0.14) per piece. It doesn’t matter whether the entire garment costs 50 rupees ($0.72) or 500 rupees ($7.20).”[42]

Shortened Lead Times, Penalty Clauses, and Payment Delays

Lead times promised by factories play a critical role in determining whether brands place orders with them.[43] Lead time is usually understood as the time from the date an order is confirmed to the date the products are readied for shipment at the factory.[44] As is true with prices, suppliers complain that a combination of factors—shrinking lead times, a lack of brand awareness about when precisely bulk production can start, and unfair penalties for missing production deadlines—create severe pressures that are incompatible with brands’ professed commitment to rights-respecting workplaces.

Shortening Lead Times 

Overall, lead times are dramatically shrinking.[45] The 2019 McKinsey State of the Fashion Report revealed how “speed in production is critical to every fashion label and retailer—not just the purveyors of fast fashion” and that “reduced lead times will be key drivers of competitive advantage.”[46] While a range of measures are being taken by companies to cut lead times including moving towards automation and near-shoring (shifting production to locations that are geographically closer to the markets),[47] suppliers and sourcing experts said that the speed-to-market pressure is passed on to factories, which in turn impacts workers.[48]

The 2016 ILO supplier survey revealed that only 17 percent of respondents across different sectors (not just apparel) believed they had sufficient lead time to produce goods.[49] The survey also revealed that 59 percent of suppliers across different sectors said that short lead times did not allow them to plan production effectively, leading to additional overtime.[50] Respondents said that shorter lead times resulted in suppliers’ increased use of overtime work, subcontracting, or hiring casual labor to meet deadlines.[51]

One supplier told Human Rights Watch: “We are getting pushed more and more to reduce our lead times…. If we don’t agree to the lead times, we might lose the order.”[52] A supplier from Pakistan also said that buyers were reducing lead times. On some products for which lead time was more than 60 days about five years ago, he said brands now expected them to be produced within a month.[53]

A former compliance expert who worked for a leading European brand for a decade and across multiple countries, said:

These are competitive enterprises—the factories—so sometimes the factories will take on more production that can be done during reasonable working hours. So, if the brand actually cares about those things then it’s up to the brand to push back and ask the right questions. And there’s definitely a big spread on the level to which brands take ownership of these issues, engage with the factories and have knowledge.[54]

Use of buying agents can also squeeze the actual time available for bulk production, putting pressure on factories, and in turn, workers. For example, a former sourcing and compliance expert said that the brand had mapped out the time it needs from design to finalizing the purchase order. But eventually they realized that the buying agent was taking another three weeks to transmit the purchase order to the factories and place orders.[55]

Brand Delays and Poor Forecasting

Brands that delay a factory’s ability to start bulk production without readjusting delivery dates put additional pressure on the factory. Moreover, brands that suddenly modify orders without addressing how the factory’s production capacity and workers will be impacted, also contribute to poor working conditions in factories.[56]

The Better Buying Purchasing Practices Spring Index 2018 found that brand-driven delays were a significant problem. According to suppliers, only about 16 percent of buyers met all agreed-upon deadlines in the product development and pre-production stages; another 20 percent of buyers failed to meet these deadlines about 80 percent of the time.[57] Most delays were caused in the pre-production stage.[58]

One Indian supplier, who until recently supplied international brands through a buying agent as well as indirectly through subcontracted work (“job work”) for exporters, said, “Buyers do badmashi (play dirty),” when it comes to lead times. He explained how some buyers had set a delivery deadline for about 60 days from the date of the order, but subsequently took as long as one and half months for all approvals. “It leaves me with 15 days to produce. And when I can’t meet the deadline, they start to say ‘late delivery’ and demand discounts.”[59]

Another supplier described how a brand wanted products manufactured within two weeks, but without providing complete details regarding size on time, delaying production. “It later led to air freight for me. But this was very stressful, and I had to fight a lot. Sometimes they push for delivery within two weeks—big huge misunderstanding regarding how it [production] really works.”[60] A common problem he experienced from some brands was the prevalence of delays in approving fabric and samples but without extending the time available for workers to produce:

Fabric and color swatches [are sent] to the customer and approval takes time. In our business we have lots of designer jokes, “The black is not black enough.” One Italian customer never confirms color. You send them six times, eight times—they just don’t confirm. And then finally when you tell them, “Your delivery will be delayed one month,” they say “No, no, it cannot be delayed. We confirm the second one.” We don’t understand this.[61]

  

Brand Penalties and Costs for Suppliers Missing Deadlines

Short lead times and hard delivery deadlines are often backed by the threat of penalty clauses. The 2016 ILO survey of suppliers found that 35 percent in the textile and clothing industry said they faced penalties from buyers for not meeting deadlines.[62] Based on supplier survey data, the Better Buying Purchasing Practices Index Spring 2018 found that about 9 percent of the buyers were said to be inflexible about deadlines and prices even when they were responsible for delays.[63] 

During in-depth interviews, suppliers told Human Rights Watch that many brands demanded discounts on the invoiced price, unreasonably citing “production delays” or “defects.” Another cost that suppliers said they often solely bear was air freight if they missed the shipment date. Suppliers also drew Human Rights Watch’s attention to brands’ practice of unreasonably canceling orders altogether in reaction to even the slightest of delays.[64]

For example, one Indian supplier, who has produced for foreign buyers, reflected on his experience of doing business with them. According to him, one category of foreign buyers “has good payment terms and don’t try to cheat you. They won’t demand discounts using small excuses or don’t stop or delay your payment.”[65] But these buyers cited their promptness in clearing payments as leverage to demand lower prices. A second category of foreign buyers he described as “the kind that doesn’t intend to pay at all.” He explained that these buyers demanded massive discounts on the invoice citing small excuses. “When they don’t intend to pay you at all, it’s easier for them to offer better rates per piece. The best buyers have given me an advance of 40 percent of the payment before production starts and then the remaining when I finish the goods,” he said.[66]

Terms and Conditions in Contracts

 

Detailed, written manufacturing contracts are not common in the industry, though there is some momentum in that direction.[67] One Indian supplier said that detailed manufacturing contracts are typically developed only when a big company sources 100 percent from one factory for multiple years and considers it a significant investment.[68] Where brands do not have a detailed manufacturing contracts, the purchase orders carry terms and conditions to varying degrees.[69] Where purchase orders are silent about delivery delays and penalties, these are usually discussed before the orders are placed.[70] 

Irrespective of whether there are written terms or conditions, sourcing experts and suppliers Human Rights Watch interviewed said that whether brands charged penalties was ultimately left to the complete discretion of the brand.[71] For example, one manufacturing contract said:

Delays and Penalties: TIME IS OF ESSENCE IN ANY PURCHASE ORDER. Shipments must be on-board Company’s carrier (in the case of FOB purchases) or Manufacturer’s carrier (in the case of DDP purchases) on next vessel close date after the ex-factory date specified in the Purchase Order and, in no event, more than seven days following the ex-factory date (the “On-Board Delivery Date”). If for any reason Manufacturer does not comply with Company’s On-Board Delivery Date, Company may at its option either approve a revised delivery schedule, require air freight shipment at Manufacturer’s expense, or cancel a Purchase Order without liability on the part of Company to Manufacturer.[72]

Suppliers alleged that in some cases, brands misused these penalty clauses to pass on losses they faced if their products did not sell in the market.[73] A London-based sourcing expert said that brands’ fair exercise of discretion to waive or invoke penalty clauses depended on brand leadership and messages that different departments received. She said that she was aware of brands that used penalty clauses to meet their profit margin goals. Another industry expert with nearly three decades experience sourcing for a multinational corporation that owns numerous brands said that penalties were decided on a case by case basis. He explained that financial penalties were an area where brands showed “who has the bigger baseball bat.” He said he was aware of brand practices where brands cut 1 or 2 percent of the freight on board (FOB) costs from the supplier if the brand sales were bad.[74] He explained that suppliers did not have a choice but had to agree because “they won’t get business anymore.”[75]

For suppliers, it is far more expensive to ship finished goods by air. Design or other last-minute changes to an order often put factories in the position of having to choose between incurring steep air freight costs to meet agreed-upon delivery times—or finding ways to make their workers finish the order more quickly.[76] Because flights are prohibitively expensive compared to shipping finished products, one factory official explained how he stood to lose money on the order if he missed the shipping deadline. “It’s cheaper for me to get workers to do overtime work and try and meet the delivery date for shipment than be delayed and pay for flight costs.”[77] One supplier in Pakistan said:
 

Workers might have to do OT [overtime] because of orders. It could be that we accept orders with delivery dates but not have all the approvals for style, sample, etc. And in that process, our delivery date gets squeezed. Then we have to do what we can to meet the delivery date. Some companies [factories] are smarter and calculate what costs more—OT or air fare.[78]

Delayed Payments

Unfair payment terms and delayed payments compound cash flow problems for suppliers. Extended payment windows require factories to take loans from banks to have money for operating costs, and interest rates vary from one production country to another. While brands’ payment terms vary widely, one industry expert said that most large brands and retailers that he had come across stipulated 90 or more days from the date of shipment, to pay the supplier.[79] Longer payment windows pose an unfair burden on suppliers, unless brands offset such delays through other favourable commercial terms for the supplier.[80]

According to the Better Buying Purchasing Practices data in fall 2018, about 65 percent of buyers adhered to payment terms and cleared bulk invoices on time.[81] Where they were delays, buyers took anywhere between 21 to 100 extra days from the actual agreed upon date, to make payments.[82]

United Kingdom Prompt Payment Code

The Prompt Payment Code in the UK is a set of voluntary standards and payment best practices for UK businesses.[83] The Chartered Institute of Credit Management implements the code on behalf of the UK Department for Business, Energy and Industrial Strategy. Code signatories undertake three key commitments—to pay suppliers on time, give clear guidance to suppliers regarding payments, and encourage good practice where lead suppliers should encourage that the code is adopted throughout their supply chains. Code signatories undertake to make payments within 60 days and endeavour to pay within 30 days. As of early April 2019, the code had 2,258 signatories.[84]

 

III.   Human Rights Abuses Fueled by Brand Purchasing Practices

Brand purchasing practices can be much more than just a headache for suppliers and a threat to their financial bottom line. Because they drive suppliers to work unreasonably fast while at the same time slashing costs, bad purchasing practices can incentivize abusive labor practices and risky contracting with unauthorized suppliers whose own labor practices may be abhorrent. This means that brand practices in these areas directly undercut their own efforts to insist on rights-respecting working conditions across their supply chains.

This report’s emphasis on the need for better human rights due diligence of brands sourcing and purchasing practices does not lessen the responsibility of supplier factories, especially to respect workers’ right to organize freely, prevent workplace abuses, or hold accountable staff who sexually harass or resort to verbal and physical abuse of garment workers. The reality, however, is that suppliers respond to the incentives brands create for them—so it is vital that brands are driving supplier practice in a more rights-respecting direction, rather than incentivizing abusive practices that might lower production costs. 

Wages and Hiring Practices

Violations of laws governing minimum wages, overtime pay, and other aspects of compensation are a persistent industry challenge.[85] Problems are clearly widespread. The ILO’s Better Work program found in a 2013 study (the latest available aggregate study) surveying five countries—Vietnam, Indonesia, Lesotho, Jordan, and Haiti—that all of them experienced widespread wage-related violations.[86]

Union leaders have protections under national laws and have the right to collectively bargain on behalf of workers with the factory management to improve wages and other working conditions. Where unions are independent and chosen freely by workers themselves, they can take steps to hold factories accountable labor abuses, including timely and accurate payment of wages and benefits, by assisting workers raise individual or collective disputes. Factories across different countries often do not allow workers to freely form or join unions.[87]

Good collective bargaining agreements (CBAs) at the factory level carry negotiated wages and benefits that are better than those set out in national labor laws. For example, in a 2015 CBA negotiated by an independent union with a factory in Cambodia, the workers negotiated a wage increase and basic wages higher than the government notified minimum wage. Workers also negotiated other paid worker benefits and breaks. The agreement also sets out dispute resolution procedures.[88] In a 2019 CBA negotiated by an independent union with a factory in Bangladesh, the workers and factory management agreed to a 10 percent annual increase in workers’ wages; a minimum number of annual promotions for women workers (which would increase their salary slab), other paid benefits, and a dispute resolution mechanism.[89] Brands that support workers’ freedom of association and collective bargaining but seek to drive down prices without factoring in labor and social compliance costs aligned with CBAs, fail to pursue a pricing strategy that prevents and mitigates human rights risks.

Overtime-related violations have been an intractable industry problem, and double bookkeeping to hide overtime hours is widespread. The ILO’s 2013 synthesis report stated that “a cross-cutting issue across all countries … is the presence of double books and inaccurate payroll records…. This is a widespread practice in the garment sector as suppliers are faced with pressures by buyers to produce quickly and at a low cost.”[90]

Factories deploy myriad ways of avoiding overtime pay that may be difficult for brands to detect absent very robust compliance mechanisms. For example, in mid-2018, a group of workers in Myanmar described how their factories had “stolen minutes” from them. They elaborated that their managers had set “hourly” production targets for every 45 or 5o minutes.[91] A labor rights advocate who routinely interacts with workers from scores of factories in Myanmar said that it was a common practice by factories, which sought to intensify work to avoid paying overtime wages.[92] 

Similarly, in India, workers from a factory described how they did overtime work during weekdays and on Sundays without overtime pay. The factory management told them they would adjust what was due as overtime pay as “earned leave,” subsequently forcing workers to take paid time off for 3-5 days during low season when the factory did not have sufficient business.[93] One of the workers said, “I did a lot of OT [overtime] dreaming of the extra money I would get and what I could do with that money. I was in tears when they said they wouldn’t give us any money for OT and [that] we would be given paid leave instead.”[94]

Industry sourcing or compliance experts drew upon their experience, narrating how they had seen brand sourcing and purchasing practices helping to fuel such problems.[95] One sourcing expert with more than 30 years’ industry experience explained that excessive overtime or unauthorized subcontracting were driven by brands that did not forecast at all or forecasted poorly.[96] He reiterated the importance of brands monitoring the difference between their projected and actual orders placed with factories. He said, “If a brand says [to a factory] they are going to order 150,000 pieces and then at the time of actually placing the order, turn around and ask for 250,000 pieces, then you are going to have OT [overtime] or subcontracting.” In 2018, while advising suppliers, he said he had found huge variations between brand projections versus actual orders, estimating that they were off about 80 percent of the time, causing problems for factories and their workers.[97]

Shelly Gottschamer, a sourcing and compliance industry expert, reiterated the importance of brands paying attention, not just to excessive working hours during bulk production, but also when samples are being made. Speaking from her previous experience, she said that where brands added another style to the collection last minute and shortened the time for the samples to be produced, it resulted in excessive work hours for those making the samples.[98]

A former social and labor compliance expert who had worked extensively in China and Southeast Asia recalled an egregious case he witnessed in 2009 in China. While this case is dated, he explained that this stood out for him because of the extreme and direct consequences a brand’s sourcing and purchasing practices had on the factory’s workers. He and his colleague visited a Chinese factory to conduct a social audit. The factory was one he was familiar with from several previous visits in an auditing capacity. He described that the day he visited the factory they “noticed that something was very wrong. There were many more people. There was a very bad atmosphere in the workshops.”[99]

After speaking to the factory management, they learned that they had taken on a huge order for a North American buyer, putting all other buyers on hold for a period of six months or so, expecting to make a big profit. But the factory received poor quality fabric and was forced to send the fabric back to the dyeing mill. The factory approached the North American buyer explaining what had happened, seeking additional time to complete production, which was refused. He said, “[T]he direct consequences of that were that everyone had to work a lot more—more than 300 hours a month,” which resulted in excessive overtime for workers.

The second consequence was massive recruitment of temporary workers. He described how the factory “went on this recruiting spree in the northwest of China” and estimated that of about 90 people recruited from really poor areas of the Chinese country side, 25 were children. “This is a horrible example and is quite extreme…. But what it shows is that purchasing practices do affect working conditions,” he said.[100]

Pakistan Case Study: Factories Use Poor Worker Hiring Practices to Cut Costs

Human Rights Watch analysis of data of apparel exports from Pakistan to the EU and the US between 2011 and 2017 shows that for the top five product categories, the nominal US dollar price per garment was largely stagnant, even though the Pakistan government consistently raised the minimum wages.

Year

Monthly Minimum Wages in Pakistan

(in Pakistani Rupees)

2008

6000 (US$43)

2010

7000 ($50.5)

8000 ($57.7) in Punjab

2012

8000 ($57.7)

9000 ($65) in Punjab

2013

10,000 ($72)

2014

12,000 ($ 86.6)

2015

13,000 ($93.9)

2016

14,000 ($101)

2017

15,000 ($108)

Source: Clean Clothes Campaign and Labour Education Foundation, nongovernmental organizations.

Six Pakistani suppliers interviewed by Human Rights Watch said that there were no meaningful price negotiations between them and the brands they worked with. Against this backdrop of intense price pressures, a range of workplace abuses are tied to suppliers’ desire to cut costs. One official with over seven years’ experience working for two apparel factories (different from the suppliers we spoke with) producing for global apparel brands described measures factories take to cut costs. He said that hiring workers through contractors and showing fewer workers as “permanent” on the payroll allowed factories to minimize costs, in large part because it obviated the need to pay the statutory benefits an employer would have to pay a regular worker:

A lot of factories hire workers through contractors. Let’s say I am a supplier or an owner. I have a factory and have to produce 200,000 jackets every month. I will talk to a few thekedars (contractors) and they will come to me and the rates are set. I will set a lump sum amount for the job. The factories don’t want any headaches [paying wages and benefits]. They will hand over the amount to the contractor and the contractor will distribute the salary to workers. These workers will not get any benefits because the contractors will not pay any benefits.[101]

Second, factories also paid lower social security contributions than they should: “A factory that has 1,000 workers pays pension and social security contributions for about 50 to 100 workers.”[102] He said it was easy to generate fake vouchers showing that contributions were paid for everyone and it was a well-oiled system of keeping costs low because government’s regulatory mechanisms are weak.[103]

When asked about poor social security contributions, one Pakistani supplier said, “There are people [factories] who don’t pay EOB [Employees’ Old-Age Benefits], it’s a cost-cutting method. They do it because their costs are too high and when they factor it all in they are unable to compete.”[104] 

Spotlight on Indonesia

Human Rights Watch analysis of EU and US trade data for apparel exported from Indonesia shows that since 2011 the nominal price per garment for the top five products (by value) produced in Indonesia has largely remained stagnant.

The ILO’s Better Work program reported in 2018 that 35 percent of the factories it monitored did not comply with minimum wage rules;[105] 76 percent of the factories did not pay social security and pension contributions as required under the law.[106] Excessive overtime is a huge problem in Indonesia—66 percent of surveyed factories violated daily and weekly overtime limits, and about 49 percent of factories did not make accurate overtime wage payments.[107]

An auditor from Indonesia, who has more than a decade’s experience conducting social compliance audits, felt unfair purchase prices contributed to factories trying to cut costs by resorting to abusive labor practices. Despite significant minimum wage differences amongst provinces, he learned while conducting social audits that the prices brands paid did not reflect these minimum wage differences, leading factories to take cost-cutting measures that impacted workers:

In Indonesia, every district has a different minimum wage. Jakarta has about 3.5 million rupiah ($247) for a month. In other provinces like West Java, the minimum wages—the lowest minimum [wage] is 1.5 million rupiah ($106). But the price for the garment is the same whether brands produce in factories in West Java or East Java. How can this be?[108]

Work Intensification

Shorter lead times combined with low buying prices drive factories to reduce costs, especially in the context of increasing minimum wages. This can result in work intensification, where factory managers revise workers’ hourly production targets upwards.[109]

Over the years, there has been a common thread running through most of the interviews Human Rights Watch carried out with garment workers in Cambodia,[110] Bangladesh,[111] India,[112] Myanmar,[113] and Pakistan[114]: relentless, ever-mounting pressure to work nonstop. Some common methods of getting workers to produce more include restricting workers’ toilet breaks; trimming their meal breaks; squeezing “trainings” into lunch or other rest breaks so the “production time” is not lost; and disallowing drinking water breaks and other rest breaks.

Nay San Lin, a 19-year-old male worker, said that his factory in Myanmar suddenly increased the hourly production targets over the course of one month in mid-2018, from 100 pieces to 120 pieces, and then 200 pieces.[115] Myanmar had increased its minimum wage earlier that year. Similarly, workers in Cambodia complained that factories had increased their targets after the minimum wages were raised, mounting intense pressure on them to meet these targets and undermining their ability to take breaks.[116]

Panh Ei Cho, a garment worker from Myanmar, recalled being publicly humiliated in her factory in early 2018. As she was using the factory’s toilet, she heard her name reverberating through the public announcement system. Her line supervisor was unhappy with her “frequent” toilet breaks and decided some public shaming was in order. The factory management’s expectation was that Panh Ei Cho should be sewing, oblivious to her bodily needs. She had diarrhea that day.[117]

Fawzia Khan, a 24-year-old unmarried woman worker who was working for over a year in the sewing department of a Pakistani factory producing for international brands said:

I hate the jail-like atmosphere at the workplace, the ban on going to the bathroom, the ban on getting up to drink water, the ban on getting up at all during work hours.... And the one hour that we are supposed to get off during the day is actually only half an hour in practice. I don’t remember the last time I got a full one hour break.[118]

A Gender Lens: The Differential Impact of Work Intensification on Women Workers

The pressure to work faster and without breaks takes a different toll on women workers. The majority of workers in the apparel industry are women of reproductive age.

Sexual Harassment and Verbal Abuse

Women workers have recounted examples of male line supervisors asking for sexual favors in exchange for lighter workloads or approving leave.[119] Alternatively, they have described putting up with sexual harassment at the hands of male mechanics, who they depend on for properly maintained machines to be able to work fast.[120]

Workers from different countries have described enduring verbal abuse, including sexualized humiliation of women workers, at the hands of line supervisors or managers, especially to goad them into working faster.[121] That underlying pressure is only increased when suppliers respond to brand purchasing practices by trying to push production forward at an unreasonable pace.

In many cases, workers themselves work without taking breaks, explaining that they do so to avoid having verbal abuses being hurled at them by line or floor supervisors.[122] Kanthi K., a 48-year-old married worker in an Indian factory producing for international brands described how the floor in-charge supervisor pressured workers to do more work by humiliating them: “You’ve done only so many pieces? And why have you passed this [for quality check]—don’t you see it needs alteration? You’re as old as a donkey. Why do you come to work? Go die somewhere else.”[123]

Jina Reza, a 34-year-old married worker from a Pakistani factory producing for an international brand described that the supervisors—all men—hurled verbal abuses at the workers to make them work faster, and that the abuses increased in the months of November and December, which she said were peak production seasons.[124]

In 2014, an ILO Better Work discussion paper drawing upon survey data on verbal abuse by supervisors in garment factories in Vietnam, Indonesia, and Jordan, found that factories were more likely to foster an abusive environment for workers when wages were low, supervisors’ pay was tied to productivity, or factories had too many “rush orders.”[125]

The Toll on Women’s Reproductive and Sexual Health, Pregnant Workers

Menstrual cycles—a natural part of all women’s reproductive health—increases women’s needs for toilet and other breaks.[126]

Menstrual hygiene challenges at the workplace are multiple. These include managers not understanding women’s need for additional time in the toilet to manage menstruation; managers not being familiar with how women may use “checking” to prevent staining their clothes; difficulty raising menstrual hygiene issues with male staff; a lack of facilities for disposing of sanitary pads or menstrual cloths; and a lack of facilities to provide workers with sanitation products.[127]

Anecdotal evidence through group discussions with women workers in Myanmar and India revealed that women are seldom able to raise concerns about the need for more frequent toilet breaks or small breaks to relieve them of menstrual cramps. This is partly due to cultural taboos or diffidence. But even where workers used euphemisms about “hip pain” and “that time of the month” to try and get their line supervisor to allow them a break, or where there were female line supervisors, they said that they were not successful. They recounted instances of being humiliated for “disrupting” the production line when they ask around for sanitary products, or demand clean facilities, or ask permission to use the toilet frequently when they are menstruating.[128] A few also reported being asked inappropriate questions about their sex lives.[129]

Pregnant workers, in particular, often become casualties in this increasing pressure to work faster. Many factories often perceive them as “unproductive” because of their needs for more breaks and rest and either fire them or do not renew their contracts.[130]

Unauthorized Subcontracting to Abusive Factories

Outsourcing production to smaller, low-cost units without brand permission is another method used by factories to cut production costs or meet production deadlines.[131] Typically, brands forbid unauthorized subcontracting—in part because it leaves them in the dark about the conditions facing workers who produce their goods.[132] But brands often struggle to detect these unauthorized arrangements, and their own sourcing and purchasing practices often create the pressures that lead suppliers to turn to them.

Sourcing or compliance experts identified poor forecasting, brands’ lack of monitoring factory’s capacities, the use of buying agents, absence of ordering time tables, last minute design changes, and low prices as among the brand purchasing practices that contribute to the use of unauthorized subcontractors by factories.[133] One sourcing expert estimated that in the mid-1990s, it took about a year for a company to produce clothes that reflected the style or design of an outfit worn by a celebrity. But “[n]ow, Kim Kardashian wears something and I expect to be able to go online and buy it within four or five weeks.”[134] She described how sourcing managers typically work:

We’ve got this style, we’ve designed it, and got all the raw materials in order. And I need 10,000 units made and I need them in stores in a month. There just aren’t factories sitting around waiting for me to rock up with 10,000 units—where they have nothing to do and they just happened to be free and available and they have all the right quality, skill set—it just doesn’t happen. So what happens as a sourcing or buying person you go to a factory that you know well and you know they can execute this thing [order] and say, “Is there any way you can execute this quantity in this time frame?” And guess what? They [the factory] will always say yes. How are they doing that? They are going out and finding someone in their network who can do it—and that’s unauthorized subcontracting.[135]

Cambodia Case Study: Growing Subcontracted Factories

Human Rights Watch has documented growing unauthorized subcontracting in Cambodia since 2012. The subcontractor factories Human Rights Watch saw in 2012, 2013, 2014, and 2016 were mostly operating out of large sheds or what looked like rural homes. Between 2014 and 2016, the number of subcontractor factories producing mostly for the export market nearly trebled—from 82 to 244.[136]

Even though the government raised the monthly basic wage (that is without adding mandatory allowances) from $100 to $153 between 2014 and 2017, EU and US trade data shows that nominal apparel prices per unit paid by international apparel brands for top five products (by value) manufactured in Cambodia mostly dropped during the same period.

In 2016, Human Rights Watch physically mapped 45 subcontractor factories in Kandal province with the help of workers. This was in addition to a few other subcontractor factories Human Rights Watch discovered in Phnom Penh. Most of these factories were unmarked, making it difficult to even detect that the building housed a factory.

Year

Monthly Minimum Wages in Cambodia

(in US$)

2008

56

2010

61

January 2012

61 (the government supplemented this basic wage with a mandatory health care allowance of $5)

September 2012

61 (the government supplemented this basic wage with mandatory allowances—$5 for health and $7 for transport and accommodation)

May 2013

80*

February 2014

100*

2015

128*

2016

140*

2017

153*

2018

170*

2019

182*

Source: ILO, “How is Cambodia’s Minimum Wage Adjusted,” Cambodian Garment and Footwear Sector Bulletin, Issue 3, March 2016, https://www.ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents... (accessed April 8, 2019); Worker Rights Consortium and Clean Clothes Campaign. *All the rates indicated are basic wages. These are supplemented by mandatory transport and accommodation allowance of $7.

In three factories where Human Rights Watch interviewed workers from export-oriented factories in Phnom Penh, the workers said that the managers from their factories had organized transport and encouraged workers to go to the subcontractor factories in Kandal and work after a full day’s work in the main factory, or alternatively on Sundays. This allowed these factories to employ their workers at another site without paying them overtime wages, special rates for night work or Sunday work, while violating weekly rest day standards for workers.[137]

Human Rights Watch found that workers in subcontractor factories had worse working conditions compared to larger factories producing directly for global brands. Workers working in subcontractor factories whom we interviewed said they did not have health clinics and they did not receive paid sick leave or other paid benefits even though workers were legally entitled to these benefits.[138] Workers also found it more difficult to form unions in subcontractor factories.[139]

Poor Occupational Health and Safety

The primary responsibility to create and maintain safe working premises rests with factory owners. But it is important to recognize that brands’ sourcing and purchasing practices are critical in the context of occupational health and safety because of the significant financial investments that are often needed to improve factory conditions. While some big suppliers, who are conglomerates, have the resources to make such investments, other smaller suppliers’ ability to carry out remediation is more influenced by brand purchasing practices.

Case Study: Fire and Building Safety in Bangladesh

In April 2013, the Rana Plaza building collapsed in Bangladesh, killing 1,138 workers and injuring over 2,000 workers. The Rana Plaza disaster—the largest in the apparel industry—came after a spate of other factory disasters.[140] The disaster revealed the ineffectiveness of the government fire and building safety inspections. It also showed how brands were doing business with unsafe supplier factories.

Following the disaster, two private fire and building safety initiatives were created in Bangladesh. The first, the Bangladesh Accord on Fire and Building Safety (Accord), is a binding agreement between mostly European brands and global union IndustriALL with strong business consequences for brands that do not carry out remediation to meet the Accord’s safety standards.[141] The second, the Alliance for Bangladesh Worker Safety (Alliance), is a non-binding initiative led by American brands, which put in place mechanisms for inspection and remediation.[142] A third initiative led by the Bangladesh government—the National Tripartite Plan of Action on Fire Safety and Structural Integrity (NTPA)—covered factories which for the most part supply smaller international brands and that did not fall under the Accord or Alliance.[143]

The Accord dramatically altered status quo. Brands could not quietly cut and run from factories that were unsafe. Brands collectively ended business with factories that did not carry out remediations even after receiving a series of warnings. For the first time, brands were required, within a legally binding framework, to facilitate financing of remediation.[144] The Accord secretariat issued guidance for financing, which also touches on sourcing and purchasing practices.[145] Brands are encouraged to reduce payment windows and prepay orders to improve factories’ cash flow, and to guarantee orders for longer periods and higher volumes, and increase the price per unit to improve overall factory revenues.[146] Arbitration disputes involving two Accord brands arose, and were settled with the brands paying more than $2.3 million towards remediating unsafe conditions in its supplier factories.[147]

Some Accord member brands reportedly supported remediation by making a few improvements to their purchasing practices in Bangladesh. For example, an industry expert who was closely involved with monitoring the functioning of the Accord and privy to discussions on financing for remediation for fire and building safety, said that he witnessed a few dozen cases where some form of financial assistance was provided to complete remediation. He said that in most of these cases, the assistance was in the form of advance payments for future orders, facilitation of bank loans at an advantageous interest rate, better payment terms, longer-term order commitments, or larger order volumes. A smaller number of brands made direct payments for remediation or increased prices to cover increased production costs.[148]

But unlike other areas where the Accord provided aggregate figures on progress, the Accord has not been able to generate aggregate figures on specific measures brands initiated to support financing. It is widely believed that this is because suppliers are reluctant to meaningfully disclose precisely which brands are not providing adequate financial assistance because of the fear that the brands will quietly terminate business with the factory.

Despite the significant progress made in Bangladesh on fire and building safety, much remains to be done for all of Bangladesh’s factories to be safe for workers.[149] In June 2016, the International Finance Corporation (IFC) projected that costs of factory repairs would be a significant roadblock for timely remediation—structural repairs being the most expensive.[150] Remediation costs for garment factories vary hugely from one factory to another depending on the nature of repairs. According to the IFC, a vast majority of garment factories needed between $120,000 and $320,000 and in some cases, up to $1.5 million.[151]

Brands’ poor sourcing and purchasing practices not only impact the funds available to factories willing to conduct repairs but also influence their bank loan eligibility. Numerous credit facilities were created to enable banks to disburse loans to finance fire and building safety repairs. But according to the IFC, “banks are naturally inclined to select only the least risky clients, avoiding financing factories with high cash flow volatility, or factories with weaker business relationships to their buyers (and therefore less regular purchase orders).”[152] A mapping of banks’ “risk appetite” shows that suppliers who have long strategic relationships to brands with no cash flow struggles are most likely to get loans needed to effect improvements.[153]

Overall, however, purchasing price trends in Bangladesh show that the nominal price per unit has dropped or stagnated since 2014, the year after the Rana Plaza collapse.[154] Further, a 2016 ILO global survey of suppliers revealed that the highest proportion of suppliers accepting orders below production costs owing to pressure from buyers are from Bangladesh.[155]

Speaking about how purchasing practices influenced factories’ ability to carry out remediation, an industry expert who worked closely with factories, buyers, and workers, said:

I’ve spoken to numerous Accord and Alliance factory owners. The remediation is running into hundreds of thousands of dollars and many of them say, “I don’t have a single buyer who will guarantee me business for more than six months.” This uncertainty and low prices do not help factories make financial investments. A loan will take them five to ten years to pay off—even with low interest rates. There are some exceptions—some big buyers who have strong relationships with a few factories and stay for a prolonged period of time.[156]

These problems are not unique to Bangladesh. For example, an industry expert said that in May 2018 he visited a factory in another country in the region, which had been supplying a European brand for more than a decade. The European brand used a Taiwanese agent to place orders. Reflecting on some of his discussions with the factory owner, he said: “The factory owner liked the loyalty. But she’s frustrated about the price. Up until recently they were paying $1.20 for the CM [cut-and-make] rate by the Taiwanese agent. And the same pair of trousers sell for 20 euro—she puts the price tags.”[157]   

The expert observed a number of labor and safety concerns for workers: “She has 200 workers and it’s a small factory. She has a dormitory next to the warehouse, next to the wood pile, next to the rice boiler. There is a giant wood pile, and anything could catch fire in any number of ways,” he said. “The owner wants to make improvements to her factory. But the prices she receives is too low. So, she says she’s kind of stuck. One of her friends who was also producing for the same brand recently went out of business. The minimum wages are also increasing.”[158]  

Other Occupational Health Concerns

In interviews with Human Rights Watch, garment workers from numerous factories across Myanmar, Bangladesh, India, and Cambodia have complained about how they work in stuffy environments without proper ventilation. Workers have described additional fans or lights being switched on before “visitors” came to factories, or masks and other personal protection equipment being distributed to them only before such visitors arrive.[159]

For example, Vinutha V., a woman working in the cutting department of a garment factory in Mysore city in southern India supplying two European brands in May 2018, described how uncomfortable it is especially during the summers:

There is no AC [air-conditioner]. There’s an AC in the PM [production manager] cabin. In the heat, the fan only circulates hot air. We can feel the sweat dripping on our backs—that’s how hot it is. The chair is so heated—we can’t even sit on it properly. And I have so much white bleeding [vaginal discharge]—I can’t even tell anyone at home. I’ve gone to the doctor and the doctor says I’m working with too much heat and I need to reduce that work. But, how can I? All these machines—the machines in the cutting section and the power machines in the sewing section—give out too much heat. We all suffer from white bleeding.[160]

A group of workers in Myanmar working for six factories described how little ventilation their factories have. For example, one worker said of her workplace: “There are 10 fans on the floor. But they keep only five switched on. And the fans that are switched on are not near my [production] line so it’s very hot where I am.”[161] Workers from ironing departments especially complained that it was very hot and described how they were soaked in sweat.[162] Some workers said that they had witnessed others fainting in their factories.[163]

Auditors and industry experts that Human Rights Watch has spoken with said that factories cut costs on maintaining ambient working conditions as well as providing quality personal protection equipment when they are squeezed on prices.[164]

 

IV. Effective Human Rights Due Diligence on Sourcing and Purchasing Practices

This report has shown how brands’ poor sourcing and purchasing practices are a prevalent root cause that incentivizes workplace abuses in supplier factories and heighten brands’ exposure to human rights risks. For that reason, brands’ efforts to improve human rights and labor compliance in their supply chains should include a range of targeted measures to identify and fix poor sourcing and purchasing practices, as outlined below.

The United Nations Guiding Principles on Business and Human Rights (UN Guiding Principles), along with the OECD Guidance on Due Diligence for Responsible Supply Chains in the Garment and Footwear Sector (OECD Due Diligence Guidance on Garments), articulate an expectation that brands should undertake human rights due diligence to identify and mitigate risks that may cause or contribute to human rights problems in their supply chains.[165] A human rights due diligence process should include “assessing” actual and potential human rights impacts, “integrating and acting upon the findings,” “tracking responses,” and “communicating how impacts are addressed.”[166] They also urge brands to engage externally to “know and show” that they are taking effective measures to tackle poor sourcing and purchasing practices.[167]

Responsible Sourcing and Purchasing Policy and its Horizontal Integration

The UN Guiding Principles state that a company’s human rights policies should be horizontally integrated into “all relevant business functions.”[168] In reality, though, many brands’ human rights due diligence efforts are largely divorced from their approach to sourcing and purchasing. Addressing that problem requires top-level buy-in and leadership. A company’s leadership should show, both internally and externally, that its sourcing and purchasing practices, and all relevant teams, are aligned with the goals of respecting workers’ rights.

One important step in this direction is for companies to develop a clearly articulated policy on responsible sourcing and purchasing practices, aligned with the OECD Due Diligence Guidance on Garments, that is adopted by its leadership and embedded within each department’s actions.[169] Some experts reiterated the importance of developing key performance indicators (KPIs) and job descriptions for sourcing and buying team personnel that are aligned with human rights and labor compliance, especially with respect to freedom of association and collective bargaining; training; and standard operating procedures for all departments on responsible sourcing and purchasing.[170]

For example, brands participating in the Action, Collaboration, and Transformation (ACT) initiative on living wages, have publicized their commitments to purchasing practices reform in five key areas.[171] Adidas has a publicly articulated policy titled the “Global Policy Manual: Responsible Sourcing & Purchasing Policy,” and has adopted other policies and procedures.[172] One of the objectives of this policy is that “[r]esponsible sourcing and purchasing practices are to be embedded in all relevant sourcing and purchasing policies and procedures” that are aligned with “[c]ontractual and financial terms that do not adversely impact compliance with the adidas Workplace Standards, including the safeguarding of legally mandated wages, benefits & compensation.”[173] These examples are not comprehensive. Numerous other brands have made inroads into integrating responsible sourcing and purchasing practices. These efforts are described in detailed public reports issued by the Fair Labor Association and the Fair Wear Foundation as part of their member-brand accreditation or reaccreditation and brand performance checks respectively.[174]

Contractual Reform

Brands have a responsibility to initiate “human rights due diligence as early as possible in the development of a new activity or relationship, given that human rights risks can be increased or mitigated already at the stage of structuring contracts or other agreements.”[175] Comprehensive contractual reform should be part of human rights due diligence and risk mitigation so that brands are developing standard terms and conditions that account for the inevitable financial costs human rights compliance creates for suppliers. In Human Rights Watch’s view, this need overlaps with supplier demands that contractual arrangements be made fairer and more transparent to a significant degree.

Key illustrative areas for reform include:

a. Introducing written contracts: this will improve predictability and clarity on terms and conditions.

b. Introducing contractual clauses that address the following:

    i.    Brand responsibility to develop a time-and-action calendar in agreement with the supplier and in accordance with labor laws, especially taking into account national public holidays and weekly rest days for workers;

  ii.    Brand responsibility to provide complete and accurate technical specifications and approvals needed before bulk production can start;

   iii.    Brand responsibility to alter delivery dates in consultation with the supplier when the brand, its agents, or its nominated materials suppliers contribute to delays from an agreed-upon time and action calendar; or alternatively, brand responsibility to waive penalties for delayed delivery and to pay for air freight;

iv.    Brand responsibility to fully negotiate prices for orders, whether repeat or otherwise, where minimum wages are increased either by the government or through workers’ collective bargaining, factory or sectoral;

   v.    Integrating business incentives for factories that comply with labor laws, especially workers’ freedom of association and complying with factory- or industry-level collective bargaining agreements.

 

External Assessment of Sourcing and Purchasing Practices

The process used to assess the actual and potential human rights impacts of a brand’s purchasing practices should “draw on international and/or independent external human rights expertise” and “involve meaningful consultation with potentially affected groups and other relevant stakeholders, as appropriate to the size of the business enterprise and the nature and context of the operation.”[176] The UN Guiding Principles also say that for assessments to be accurate, businesses should “seek to understand the concerns of potentially affected stakeholders by consulting them directly in a manner that takes into account language and other potential barriers to effective engagement.”[177] A key barrier to engagement is the fear of suppliers that if they provide an honest assessment to the brand about its purchasing practices, it will adversely impact the business relationship.[178] Therefore, the chances of getting accurate information are higher when brands allow their suppliers to anonymously give information through a neutral third party.

The OECD Due Diligence Guidance on Garments urges buyers to “engage” with suppliers to understand how their purchasing practices contribute to harm. In particular, “the enterprise may seek to collect information from its suppliers anonymously (e.g. annual survey) or partner with a third party that aggregates the data and presents findings.”[179] 

Third-party run surveys like Better Buying provide suppliers an opportunity to participate in surveys and publish aggregate information about brand purchasing practices. Brands that have been ranked by Better Buying can also request a private, tailor-made copy of survey results. In 2018, 20 buyers invited their suppliers to anonymously rank their purchasing practices through Better Buying.[180] While the survey is new and has scope for improvement, it is the first detailed third-party survey of its kind in the apparel industry.  

Participating in Collective Brand Initiatives Developed with Worker Representatives

Brands have the power to structure their supply chain, that is, to make decisions about how many suppliers and countries they source from, the production volumes in each factory, the length of business relationships, and whether and to what extent they use buying agents. The practical implication of this is that some suppliers have strategic long-term relationships with one brand that books full capacity. But a vast majority of suppliers often do business with several different brands, and any one brand’s leverage and control over those suppliers is limited. As a result, typically, a single brand’s due diligence on sourcing and purchasing practices is usually unlikely to meaningfully and sustainably influence conditions in the factories it sources from unless other brands sourcing from the same factory assume their fair share of responsibility too.[181]

Suppliers, too, face stiff competition on prices. Therefore, ensuring that all suppliers in a country are equally committed to accurately costing for labor and social compliance, without slashing them to stay competitive is important.

Initiatives that combine collective brand action on sourcing and purchasing practices with industry-wide collective bargaining seek to cut through these complex supply chain dynamics and help reduce brand exposure to human rights risks. A sectoral collective bargaining agreement with an industry association means that all factories that are members of the industry association would have to abide by the agreement. Such an approach reduces the risk of factories slashing social and labor compliance costs to stay competitive. When such sectoral collective bargaining is combined with collective brand action, it improves brand leverage over factories, reduces the risk of free-rider brands, and also sets a basic framework for social and labor compliance costs that brands participating in such initiatives should factor into their costing.

Such collective initiatives would be far more effective where they have dispute resolution mechanisms at two levels: first, to hold brands accountable if they renege on their commitments and second, to hold suppliers accountable if they do not comply with the sectoral CBA. These initiatives will also be more credible if they transparently report on the program’s impact on brand purchasing practices and factory working conditions, and also monitor whether brands’ responsible purchasing commitments are transposed into legal contracts with suppliers.

The “Action, Collaboration, and Transformation (ACT) on Living Wages” initiative seeks to combine workers’ freedom of association and industry-wide collective bargaining to improve workers’ wages with collective brand commitments to reform purchasing practices.[182] While the initiative is non-binding[183] and yet to develop a robust monitoring and public reporting framework in consultation with a range of stakeholders, it is the first attempt of its kind.[184] So far, it has brought together about 20 apparel companies.[185]

In November 2018, brand members agreed on a set of five actions regarding purchasing practices. These are brand commitments to include workers’ wages as itemized costs; fair terms of payment; better planning and forecasting; undertaking training on responsible sourcing and buying; and responsible exit strategies.[186] ACT brands are also required to conduct a “self-assessment” of their purchasing practices based on an evaluation tool.[187] At time of writing, however, ACT has yet to publish a summary of the scores for each area where brands were self-assessed.  

ACT brands have further undertaken to develop country-specific sourcing commitments for countries where there are collective bargaining agreements that carry three key criteria—wage growth and a negotiated collective bargaining commitment, full respect for freedom of association, and a robust monitoring and enforcement mechanism.[188] For Cambodia, where unions are negotiating a collective bargaining agreement with the Garment Manufacturers Association of Cambodia, ACT brands have committed to maintaining their sourcing volumes. At time of writing, the collective bargaining agreement has yet to be concluded in Cambodia or other priority country. The other priority countries are Bangladesh, Myanmar, and Turkey.[189]

Apparel companies that have invited their suppliers to rank them anonymously through Better Buying, and have also joined the ACT Initiative: Bestseller, K-Mart Australia, and N Brown Group.

Using Labor Costing Tools to Help Improve Purchasing Prices

Initiatives like ACT and Fair Wear Foundation’s Living Wage program are supporting the development of models to calculate labor costs to help ensure that brands assume their fair share of responsibility for social and labor compliance costs at the factory level.

The ACT initiative seeks to isolate labor costs. This is being done to assist brands in adjusting their purchasing practices in support of negotiated sectoral wage increases through collective bargaining. The Fair Wear Foundation’s program seeks to assist suppliers in negotiating better prices from brands, especially in the context of rising minimum wages.

Given the recent increase in statutory minimum wages in Bangladesh, for example, the Fair Wear Foundation worked closely with knitwear suppliers in Bangladesh and developed a labor costing tool.[190] It is the process of developing similar labor costing tools in 10 other countries.[191] It also allows buyers to assess how they should increase their purchase prices to account for an increased wage bill. Tailored costing models for each country, experts believe, will begin to assist suppliers work out a labor cost as a distinct form of the product cost. Experts also believe that such costing models could become the basis for agreements between unions and industry associations, allowing them to join forces in demonstrating to brands the cost of labor in a country.

Transparency: Tracking and Externally Communicating Progress

Brands should map out and publish the names and other details of their supplier factories in accordance with the Transparency Pledge.[192] In addition, brands should track the effectiveness of the measures they take.[193] Tracking should be based on “appropriate quantitative and qualitative indicators” and draw on feedback from both “internal and external sources, including affected stakeholders.”[194] The OECD Due Diligence Guidance on Garments recommends that a company track its purchasing practices using indicators that include, for example, “percentage of orders placed late, percentage of orders changed after order is placed, number of days between the last change and shipment.”[195] In June 2018, the NYU Stern Center for Business and Human Rights published a set of 13 indicators on purchasing practices, which it is currently pilot testing.[196] These indicators are aimed at influencing how investors track the social impacts of businesses.[197]

Finally, brands should hold themselves accountable by externally communicating information about their efforts and its impact. In general, companies have a responsibility to communicate in “a form and frequency that reflects the enterprise’s human rights impacts,” make that communication “accessible to its intended audience,” and provide information that is “sufficient to evaluate the adequacy of an enterprise’s response to the particular human rights impact involved.”[198]

Almost no company communicates its progress on reforming purchasing practices to affected stakeholders in a way that is accessible to them and is based on a set of indicators. Individual companies provide some information about their purchasing practices but to what extent their efforts are effective in preventing or reducing workplace abuses is not known.[199]

This gap is filled to some extent by at least two multi-stakeholder initiatives—the Fair Labor Association and the Fair Wear Foundation.[200] The Fair Labor Association, a multi-stakeholder initiative comprising of brands, suppliers, and NGOs, publishes all its brand accreditation or re-accreditation reports, which provide information about its member-brands’ purchasing practices.[201] While the information contained in these reports is useful, a uniform set of indicators is not used to track progress and publicly score-card member-brands.[202] As a result, it is difficult for workers and advocates to gauge whether the policies and processes described in these reports have had an impact on mitigating labor rights risks in the company’s supply chain and how the company has made progress over time.

The Fair Wear Foundation (FWF) publicly scorecards its members on their purchasing practices based on 12 indicators.[203] The scorecard method is useful and more accessible. Among other things, the indicators track and report progress on how member-brands structure their supply chains to improve leverage;[204] whether their pricing supports the payment of at least legal minimum wages;[205] steps they take to reduce excessive overtime in the factories that produce for them;[206] and whether they made any late payments to suppliers. However, these indicators are not fully aligned with those recommended by the OECD Due Diligence Guidance on Garments.[207]

Better Buying, a third party, produces aggregate results for all the brands and retailers on a range of topics based on supplier surveys.[208] While these supplier surveys are relatively new and can be improved, this is the only publicly available information in the industry that names brands and provides aggregate results based on important aspects of purchasing practices. Brands can purchase a detailed in-depth report tailored to the company and are free to disclose or summarize the results. Doing so would make a significant contribution to the larger effort to develop and replicate effective policies in this area. As of April 2019, however, no brand has published a summary of rankings they have received through Better Buying, let alone the full report.

 

Recommendations

To All Apparel Brands

Carry out human rights due diligence of purchasing practices that includes the following components:

  • Take steps to map out the supply chain, consolidate the tail end of the supply chain, ensure full visibility over supplier factories, and publish a list of these in accordance with the Transparency Pledge.
  • Evaluate the use of buying agents and put in place additional due diligence mechanisms tailored to monitoring buying agents.
  • Create and publish a policy on responsible purchasing practices in consultation with relevant stakeholders and aligned with UN Guiding Principles on Business and Human Rights and the OECD Guidance on Due Diligence on Responsible Supply Chains in the Garment and Footwear Sector. Embed the policy within all departments of the brand through job descriptions, performance assessments, incentives, training programs, and periodically report progress on adherence. In particular, integrate key performance indicators (KPIs) regarding social and labor compliance, especially adherence to workers’ freedom of association and collective bargaining agreements, into the overall assessment framework of sourcing teams.
  • Institute contractual reform to develop fair purchasing agreements as part of company’s efforts to prevent and mitigate labor rights risks to workers from unfair purchasing practices. These agreements should explicitly account for the costs of labor and of broader human rights compliance.
  • Integrate suppliers’ anonymous feedback on purchasing practices through third party surveys like Better Buying to improve accuracy of data by mitigating suppliers’ fear of providing feedback; seek customized individual brand reports to monitor and rectify purchasing practices; and disclose periodic progress by summarizing the rankings received through Better Buying Purchasing Practices Index scores over time.
  • Join initiatives that combine collective brand reform on purchasing practices with sectoral collective bargaining like the Action, Collaboration, and Transformation (ACT). Until such initiatives conclude collective bargaining agreements and costing models, supplement joining them with at least the following measures:
    • Ensure that prices explicitly factor in labor costs and encourage suppliers to use country-specific labor costing tools like those being developed by the Fair Wear Foundation.
    • Publicly report on the number of collective bargaining agreements in supplier factories (especially where there are no sectoral agreements), the impact of such agreements on factory working conditions, and how brand purchasing practices incentivize adherence to such collective bargaining agreements.

 

To Multi-Stakeholder and Industry Initiatives, including amfori BSCI, Dutch Covenant, the Ethical Trading Initiatives of Denmark, Norway, and UK, Fair Labor Association, Fair Wear Foundation, German Partnership for Sustainable Textiles, and Sustainable Apparel Coalition

  • Make publishing supplier factories in accordance with the Transparency Pledge a mandatory condition of membership.
  • Encourage member brands to seek anonymous feedback through supplier surveys like Better Buying survey reports tailored to them and disclose the summary of the scores publicly.
  • Encourage member brands to join collective initiatives like the ACT Initiative in its priority countries and take other interim measures until ACT Initiative’s industry-wide collective bargaining agreements are negotiated and have demonstrable impact.
  • Develop a set of key indicators on purchasing practices that informs monitoring efforts to assess brand purchasing practices and publicly report progress using these indicators. These indicators should be developed in consultation with industry experts, unions, labor advocates, and draw on the OECD Due Diligence Guidance on Garments and indicators developed by the NYU Stern Center for Business and Human Rights and the Fair Wear Foundation.

To Governments

  • Develop legislation requiring mandatory global supply chain human rights due diligence by companies, including their sourcing and purchasing practices.
  • Ensure that all public procurement integrates mandatory human rights due diligence measures, including on sourcing and purchasing practices.
  • Ratify all ILO core labor conventions and reform labor laws to fully comply with these international labor standards.
  • Governments of apparel producing countries should publicly and regularly disclose (e.g. every four months) the number of factories inspected, key labor rights violations found, and enforcement actions taken. The terms of disclosure should be finalized in consultation with various actors, including labor rights advocates, independent unions, and the ILO.

To the International Labour Organization and its Better Work Program

  • Research and develop in consultation with unions and labor advocates, a compendium of good clauses negotiated in factory-level collective bargaining agreements drawn from different production countries.
  • Research and develop training programs to improve understanding of costing and its impact on labor compliance among factory and federation-level union representatives, and other worker committees.
  • Commission special studies that evaluate how brand purchasing practices have influenced the adherence to collective bargaining agreements.

 

Acknowledgments

This report was researched and written by Aruna Kashyap, senior counsel in the women’s rights division at Human Rights Watch, with research support from consultants. Brian Root, quantitative analyst at Human Rights Watch, provided additional assistance.

The report was edited by Chris Albin-Lackey, senior legal advisor and Tom Porteous, deputy director in the Program Office. It was also reviewed by Phil Robertson, deputy director for Asia; Andreas Harsono, senior researcher for Indonesia; Saroop Ijaz, Legal Advisor for Pakistan; Yaqiu Wang, China researcher; and other Asia researchers and senior researchers.

Production assistance was provided by Agnieszka Bielecka and Erika Nguyen, coordinators in the women’s rights division; and Fitzroy Hepkins, administrative manager.

Human Rights Watch gratefully acknowledges the time taken by workers, suppliers, social auditors, former and current brand representatives, and other experts who made this work possible.

 

 

[1] This report uses the word “brand” to describe apparel and footwear companies that own brands, and retailers. The term “buyer” has been used interchangeably with “brand.”

[2] Human Rights Watch interview with supplier 6 who requested anonymity, Pakistan, June 2018.

[3] Laurie Chen, “Lunar New Year puts seal on Peppa Pig’s Chinese comeback,” South China Morning Post, February 4, 2019, https://www.scmp.com/news/china/society/article/2185004/lunar-new-year-p... (accessed April 8, 2019).

[4] References to apparel in this report include apparel and footwear. The term “brands” includes retailers.

[5] Imran Amed, Johanna Andersson, Achim Berg, Martine Drageset, Saskia Hedrich, and Sara Kappelmark, “The State of Fashion 2018: Renewed Optimism for the Fashion Industry,” McKinsey and Company, November 2017, https://www.mckinsey.com/industries/retail/our-insights/renewed-optimism... (accessed April 8, 2019).

[6] Elizabeth Hunter, Sophie Marchessou, Jennifer Schmidt, “The Need for Speed: Capturing Today’s Fashion Consumer,” McKinsey and Company, March 2018, https://www.mckinsey.com/industries/retail/our-insights/the-need-for-spe... (accessed April 8, 2019). 

[7] Ibid.

[8] “Better Buying,” https://betterbuying.org (accessed February April 10, 2019).

[9] Leonie Barrie, “Outlook 2019 – Apparel Industry challenges and opportunities,” Just-Style, January 15,2019, https://www.just-style.com/analysis/outlook-2019-apparel-industry-challenges-and-opportunities_id132645.aspx (accessed April 10, 2019).

[10] For example, Jeroen Merk, “From Code Compliance to Fair Purchasing Practices: Some Issues for Discussion,” Paper written for the Clean Clothes Campaign Roundtable on Purchasing Practices, May 11, 2005, https://cleanclothes.org/resources/publications/05-05-fair-purchasing-practices.pdf (accessed April 8, 2019).

[11] Doug Miller and Klaus Hohenegger, “Redistributing value added towards labour in apparel supply chains: Tackling low wages through purchasing practices,” ILO Conditions of Work and Employment Series No. 83, 2017, https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---travail/documents/publication/wcms_534536.pdf (accessed April 8, 2019); Mark Starmanns, “Purchasing practices and low wages in global supply chains: Empirical cases from the garment industry,” ILO Conditions of Work and Employment Series No. 86, 2017, https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---tra... (accessed April 8, 2019).

[12] See for example, Inditex, “Code of Conduct for Manufacturers and Suppliers Inditex Group,” undated, https://www.inditex.com/documents/10279/241035/Inditex+Code+of+Conduct+for+Manufacturers+and+Suppliers/e23dde6a-4b0e-4e16-a2aa-68911d3032e7 (accessed January 15, 2019); Nike, “Nike Code of Conduct,” September 2017, https://sbi-stg-s3-media-bucket.s3.amazonaws.com/wp-content/uploads/2018/05/14214943/Nike_Code_of_Conduct_2017_English.pdf (accessed April 10, 2019); Fast Retailing Group, “Code of Conduct for Production Partners,” undated, https://www.fastretailing.com/eng/sustainability/labor/pdf/coc_en.pdf (accessed April 10, 2019).

[13] International Labour Organization (ILO), “Purchasing practices and working conditions in global supply chains: Global Survey results,” INWORK Issue Brief No. 10, 2016, http://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---trav... (accessed April 10, 2019), p. 10, Figure 18 (cited as “ILO Supplier Survey on Purchasing Practices, 2016”). While discussing the results of the ILO survey, Human Rights Watch uses the phrase “apparel suppliers” to include textile, clothing, and leather suppliers. More than a fifth of the 1,454 supplier-respondents were from the readymade garment industry. 

[14] Ibid, p. 7. See also Better Buying, “Better Buying Index Report Spring 2018”, May 2018, https://betterbuying.org/wp-content/uploads/2018/05/4159_better_buying_report_final.pdf (accessed April 8, 2019), p. 24 (cited as “Better Buying Purchasing Practices Index Spring 2018”). The 2018 Spring Index was based on 218 supplier ratings of 65 apparel buyers. Better Buying found that 38.1 percent of suppliers indicated that the prices they received for all their products covered compliant production; another 40 percent of suppliers said about 80-99 percent of their orders covered compliant production costs; 20.6 percent of suppliers said they received orders that did not cover compliant production costs. 

[15] Ibid., p. 8.

[16] Ibid.

[17] Ibid., p. 18.

[18] Better Buying, “Better Buying Index Report Fall 2018,” October 2018, https://betterbuying.org/wp-content/uploads/2018/10/Better-Buying-Benchmark-Report_fall-2018.pdf (accessed April 8, 2019), p. 7 (cited as “Better Buying Purchasing Practices Index Fall 2018”). 

[19] “Better Buying Purchasing Practices Index Spring 2018,” p. 24.

[20] “Better Buying Purchasing Practices Index Fall 2018,” pp. 10-11. In the report, favorable payment terms include the following: Buyer paid for sampling costs at or before shipment; Buyer paid deposits on volume orders; Buyer issued letters of credit for volume orders; Buyer paid for volume orders in full on or before shipment; any others.

[21] “Better Buying Purchasing Practices Index Spring 2018,” p. 25.

[22] Human Rights Watch interviews with nine suppliers from South Asia and Southeast Asia, April, May, June, and September 2018.  

[23] Human Rights Watch interview with supplier 2 who requested anonymity, supplier manufacturing for 6-8 international clothing brands, Pakistan, June 2018.

[24] Human Rights Watch interview with supplier 6 who requested anonymity, supplier with vertically integrated business supplying global brands, Pakistan, June 2018.

[25] Human Rights Watch interviews with supplier 7 who requested anonymity, supplier who also worked through buying agents, India, September 2018.

[26] Human Rights Watch interviews with supplier 1 who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018.

[27] Human Rights Watch interview with supplier 5 who requested anonymity, supplier who estimated that about 90 percent of the products were made for US brands and the remaining for European brands, with a small percentage for the local market, Pakistan, June 2018.

[28] Human Rights Watch interview with supplier 8 who requested anonymity, supplier who produced for 12-15 global brands, Pakistan, June 2018.

[29] Human Rights Watch phone interviews with Shelly Gottschamer, expert with 20 years of experience sourcing for multiple large multinational corporations, December 13, 2018 and January 16, 2019.

[30] Ibid.

[31] Human Rights Watch phone interview with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous global brands, London, January 15, 2019.

[32] Human Rights Watch interview with supplier 8 who requested anonymity, supplier who produced for 12-15 international brands, Pakistan, June 2018; phone interview with supplier 10 who requested anonymity, India, January 2019.

[33] Human Rights Watch workshop on purchasing practices, London, November 13, 2018. 

[34] Human Rights Watch phone interview with UM who requested anonymity, former sourcing and compliance expert, US, October 30, 2018.

[35] Ibid.

[36] Ibid. UM explained that the brand’s contract with the buying agent had legal terms where the brand could seek to also conduct unannounced visits of the factories the agent was sending the purchase orders to.

[37] Ibid.

[38] Human Rights Watch phone interview with former sourcing expert who worked for multiple multinational brands for more than 20 years, Canada, December 13, 2018.

[39] Ibid.

[40] Ibid.

[41] Human Rights Watch phone interview with an industry expert with experience of working closely with factories in Bangladesh and other parts of Asia, US, and South America, who requested anonymity, location withheld, December 16, 2018.

[42] Human Rights Watch interviews with supplier 7 who requested anonymity, supplier who worked through buying agents, India, September 2018.

[43] “ILO Supplier Survey on Purchasing Practices, 2016,” p. 10, Figure 18.

[44] Human Rights Watch interview with supplier 3 who requested anonymity, Pakistan, June 2018. For example, one supplier said brands he did business with international buyers, who calculated lead times in other ways—for some it was the time from the date the order was confirmed to the date of delivering the goods to the port for shipment; others calculated the time till the date of delivering goods to the buyer’s warehouse.

[45] Imran Amed, Anita Balchandani, Marco Beltrami, Achim Berg, Saskia Hedrich, and Felix Rölkens, “The State of Fashion 2019: A Year of Awakening,” McKinsey and Company, November 2018, https://www.mckinsey.com/industries/retail/our-insights/the-state-of-fashion-2019-a-year-of-awakening (accessed April 8, 2019) (cited as “McKinsey State of Fashion 2019 report”). See also, Michelle Russell, “Rana Plaza five year on – A Time for Reflection,” Just-Style, April 24, 2018, https://www.just-style.com/comment/rana-plaza-five-years-on-a-time-for-reflection_id133249.aspx (accessed April 8, 2019).

[46] “McKinsey State of Fashion 2019 report,” pp. 37, 85.

[47] Ibid., p. 87.

[48] Human Rights Watch interviews with suppliers from India, Pakistan, and Southeast Asia, April-September 2018; phone interview with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous global garment brands, London, January 15, 2019.

[49] “ILO Supplier Survey on Purchasing Practices, 2016,” p. 6, Figure 10. Of the 1454 respondents in the survey, 21 percent were from the readymade garment industry (the highest percent), another 5 percent from textiles, and 2-3 percent leather and footwear. The ILO report does not define what constitutes “sufficient” lead time.

[50] Ibid., p. 15.

[51] Ibid., p. 6.

[52] Human Rights Watch interviews with supplier 1 who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018.

[53] Human Rights Watch with supplier 4 who requested anonymity, Pakistan, June 2018.

[54] Human Rights Watch phone interviews with GH who requested anonymity, former Corporate Social Responsibility (CSR) representative for a European brand with over 10 years of experience overseeing social and labor compliance across multiple countries, Europe, November 27, 2018 and January 16, 2019.

[55] Human Rights Watch phone interview with UM who requested anonymity, former sourcing and compliance expert, US, October 30, 2018.

[56] Human Rights Watch phone interviews with Klaus Hohenegger, LO who requested anonymity, and DN who requested anonymity, sourcing and supply chain experts, January 2019. For more information about how poor forecasting adversely impacts a factory, see Section III.

[57] “Better Buying Purchasing Practices Index Spring 2018,” p. 26.

[58] “Better Buying Purchasing Practices Index Fall 2018,” p. 13. Human Rights Watch interviews with nine suppliers in South and Southeast Asia. Human Rights Watch interviewed suppliers who said there were delays in brand approvals of material swatches, samples, and pre-production samples. Brands making last-minute changes to designs or specifications also caused delays and reduced the time available for the factory to begin bulk production and meet shipment deadlines.

[59] Human Rights Watch interviews with supplier 7 who requested anonymity, supplier who also worked through buying agents, India, September 2018.

[60] Human Rights Watch interviews with supplier 1 who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018.

[61] Ibid.

[62] “ILO Supplier Survey on Purchasing Practices, 2016,” p. 6.

[63] “Better Buying Purchasing Practices Index Spring 2018,” pp. 26-7.

[64] Human Rights Watch interviews with three suppliers, Pakistan, May and June 2018.

[65] Human Rights Watch interviews with supplier 7 who requested anonymity, supplier who also worked through buying agents, India, September 2018. 

[66] Ibid.

[67] Human Rights Watch phone interview with HU who requested anonymity, an industry expert with experience of conducting thousands of social audits and also working with brands and suppliers, US, January 31, 2019. HU said he had seen manufacturing contracts mostly used by big footwear companies and less so by others, but said there was a growing move toward such manufacturing contracts; Human Rights Watch phone interviews with Klaus Hohenegger, Sourcing Solutions GmbH, January 21, 2019. See also “ILO Supplier Survey on Purchasing Practices, 2016” pp. 3-4.

[68] Human Rights Watch phone interview with supplier 10, India, January 2019.

[69] Human Rights Watch interview with industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous international brands, London, January 15, 2019. Purchase orders on file with Human Rights Watch.

[70] Human Rights Watch phone interview with Klaus Hohenegger, January 21, 2019. Hohenegger explained that especially in the case of small and medium enterprise-brands, the purchase orders carried only basic terms—price, delivery date, and product types—and the rest was discussed.

[71] Human Rights Watch interviews with 10 suppliers from India, Pakistan, and Southeast Asia, April 2018 to January 2019; phone interview with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous international garment brands, London, January 15, 2019; phone interview with HU who requested anonymity, an industry expert with experience of conducting thousands of social audits and also working with brands and suppliers, US, January 31, 2019; phone interviews with LO who requested anonymity, sourcing expert with more than 30 years of industry experience, US, October 23, 2018 and January 21, 2019.

[72] Extract of Manufacturing Contract, on file with Human Rights Watch.

[73] Human Rights Watch interviews with supplier 10, supplier 7, supplier 1 who requested anonymity from South Asia and Southeast Asia, April—June 2018; with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous international garment brands, London, January 15, 2019; phone interviews with LO who requested anonymity, sourcing expert with more than 30 years of industry experience, US, October 23, 2018 and January 21, 2019.

[74] Freight on board cost is the cost incurred by the supplier to make the product and deliver it to the nearest port. In this system of costing, the cost of shipping the goods, and all other associated fees are borne by the buyer.

[75] Human Rights Watch phone interviews with LO who requested anonymity, sourcing expert with more than 30 years of industry experience, US, October 23, 2018 and January 21, 2019.

[76] Human Rights Watch interviews with supplier 1 who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018.

[77] Ibid.

[78] Human Rights Watch interview with supplier 5 who requested anonymity, supplier who estimated that about 90 percent of the products were made for US brands and the remaining for European brands, with a small percentage for the local market, Pakistan, June 2018.

[79] Human Rights Watch phone interview with HU who requested anonymity, an industry expert with experience of conducting thousands of social audits and also working with brands and suppliers, US, January 31, 2019.

[80] Ibid.

[81] “Better Buying Purchasing Practices Index Fall 2018,” p. 11. In the report, favorable payment terms include the following: Buyer paid for sampling costs at or before shipment; Buyer paid deposits on volume orders; Buyer issued letters of credit for volume orders; Buyer paid for volume orders in full on or before shipment; any others.

[82]Ibid., p. 10

[83] Human Rights Watch workshop on purchasing practices, London, November 14-15, 2018. Department of Business, Energy, and Industrial Strategy and Chartered Institute of Credit Management, “Prompt Payment Code,” http://www.promptpaymentcode.org.uk/ (accessed April 10, 2019).

[84] Ibid., “Signatories,” http://212.36.126.249/ppc/ppc_signatory.a4d (accessed April 8, 2019).

[85] Fair Labor Association, “Toward Fair Compensation in Global Supply Chains: Factory Pay Assessments in 21 Countries,” August 2016, http://www.fairlabor.org/sites/default/files/documents/reports/toward_fa... (accessed April 10, 2019); Oxfam Australia, “What She Makes: Power and Poverty in the Fashion Industry,” October 2017, https://whatshemakes.oxfam.org.au/wp-content/uploads/2017/10/Living-Wage-Media-Report_WEB.pdf (accessed April 8, 2019).

[86]ILO Better Work, “Better Work: Stage II: Global Synthesis Report 2009-2012,” 2013, https://betterwork.org/global/wp-content/uploads/Global-Synthesis-Report... (accessed April 8, 2019), p. 12. The Global Compliance report drew upon data from Vietnam, Indonesia, Jordan, Lesotho, and Haiti. Wage-related violations include non-payment of minimum wages, overtime wages, paid leave, social security and other benefits, and improper information about wages to workers and wage deductions. The report did not incorporate findings from Better Factories Cambodia because the assessment tools were not yet harmonized between that program and Better Work in other parts of the world.

[87] See for example, Human Rights Watch, “Work Faster or Get Out:” Labor Abuses in Cambodia’s Garment Industry, March 2015, http://features.hrw.org/features/HRW_2015_reports/Cambodia_Garment_Workers/index.html; Whoever Raises their Head Suffers the Most: Workers’ Rights in Bangladesh’s Garment Factories, April 2015, http://features.hrw.org/features/HRW_2015_reports/Bangladesh_Garment_Factories/; No Room to Bargain: Unfair and Abusive Labor Practices in Pakistan, January 2019, https://www.hrw.org/report/2019/01/23/no-room-bargain/unfair-and-abusive-labor-practices-pakistan.

[88] Collective Bargaining Agreement between Labour and Management, 2015, (names of parties withheld), on file with Human Rights Watch.

[89] “Bilateral Settlement as per Section - 210(3) of the Bangladesh Labour Act, 2006,” 2019 (names of parties withheld), on file with Human Rights Watch.

[90] “ILO, Global Synthesis Report 2009-2012,” p. 13.

[91] Human Rights Watch group interviews with 12 workers from 6 factories, Yangon, May 20, 2018.  

[92] Human Rights Watch interview with Yu Yu Aung (pseudonym), labor rights advocate, Myanmar, May 20, 2018.

[93] Human Rights Watch interview with six workers from three factories, India, May 11, 2018.

[94] Human Rights Watch interview with Sanjana S. (pseudonym), India, May 11, 2018. Under Indian labor law, “earned leave” is a category of paid time off that accrues to a worker depending on the number of days worked the previous year.

[95] Human Rights Watch phone interviews with GH who requested anonymity, former CSR representative for a European brand with over 10 years of experience overseeing social and labor compliance across multiple countries, Europe, November 27, 2018 and January 16, 2019; OE who requested anonymity, CSR head for a European brand, Europe, July 3, 2018.

[96] Human Rights Watch phone interviews with LO who requested anonymity, sourcing expert with more than 30 years of industry experience, US, October 23, 2018 and January 21, 2019. For more information about forecasting, see for example, P. Dhanpal and S. Anita, “Fashion Forecasting,” Fibre2Fashion, https://www.fibre2fashion.com/industry-article/83/fashion-forecasting?page=1 (accessed April 8, 2019). Forecasting involves predicting consumer tastes and demands for particular styles.

[97] Human Rights Watch phone interviews with LO who requested anonymity, sourcing expert with more than 30 years of industry experience, US, October 23, 2018 and January 21, 2019.

[98] Human Rights Watch interviews with Shelly Gottschamer, December 13, 2018 and January 16, 2019.

[99] Human Rights Watch phone interview with GH who requested anonymity, former CSR representative for a European brand with over 10 years of experience overseeing social and labor compliance across multiple countries, Europe, November 27, 2018.

[100] Ibid.

[101] Human Rights Watch phone interview with factory official in Pakistan who requested anonymity, July 24, 2018.

[102] Ibid.

[103] Ibid.

[104] Human Rights Watch second interview with supplier 2 who requested anonymity, supplier manufacturing for 6-8 international clothing brands, Pakistan, July 2018.

[105] ILO Better Work, “Annual Report 2018: An Industry and Compliance Review, Indonesia,” 2018, https://betterwork.org/blog/portfolio/better-work-indonesia-annual-repor... (accessed April 15, 2019), p. 17.

[106] Ibid.

[107] Ibid.

[108] Human Rights Watch phone interview with A2 who requested anonymity, auditor, Indonesia, April 24, 2018.

[109] Human Rights Watch workshop on purchasing practices, London, November 14-15, 2018.

[110] Ibid.

[111] Human Rights Watch, Whoever Raises their Head Suffers the Most.

[112] Human Rights Watch interviews with 20 workers from six factories in Bangalore and Mysore, and three union federation leaders, May 2018. 

[113] Human Rights Watch interviews with 25 workers from 8 factories in Myanmar in May 2018.

[114] Human Rights Watch, No Room to Bargain.

[115] Human Rights Watch interview with Nay San Lin (pseudonym), Myanmar, May 10, 2018.

[116] Human Rights Watch, “Work Faster or Get Out:” Labor Abuses in Cambodia’s Garment Industry, pp. 55-58; Center for Alliance of Labor and Human Rights, “Rising Production Targets Undermining Minimum Wage Increases,” December 10, 2018, https://www.central-cambodia.org/archives/2460 (accessed April 8, 2019).

[117] Human Rights Watch interview with Panh Ei Cho (pseudonym), Myanmar, May 20, 2018.

[118] Human Rights Watch interview with Fawzia Khan (pseudonym), Lahore, May 2018.

[119] Human Rights Watch, Combating Sexual Harassment in the Garment Industry, February 12, 2019, https://www.hrw.org/news/2019/02/12/combating-sexual-harassment-garment-industry.

[120] Human Rights Watch group interview with workers from a factory in Phnom Penh (names withheld), Phnom Penh, December 5, 2013.

[121] Human Rights Watch, “Work Faster or Get Out:” Labor Abuses in Cambodia’s Garment Industry, Whoever Raises their Head Suffers the Most;” Human Rights Watch interviews with 40 workers in Myanmar and India, May 2018.

[122] Ibid.

[123] Human Rights Watch interview with Kanthi K. (pseudonym), India, May 10, 2018.

[124] Human Rights Watch interview with Jina Reza (pseudonym), Lahore, May 2018.

[125] Emily L. Rourke, “Is there a Business Case Against Verbal Abuse? Incentive Structure, Verbal Abuse, Productivity and Profits in Garment Factories,” ILO Better Work Discussion Paper Series No. 15, September 2014, https://betterwork.org/global/wp-content/uploads/2014/09/DP-15-web.pdf (accessed April 8, 2019).

[126] Sarah House et al., “Menstrual Hygiene Matters: A Resource for Improving Menstrual Hygiene Around the World,” WaterAid, 2012, https://washmatters.wateraid.org/sites/g/files/jkxoof256/files/Menstrual%20hygiene%20matters%20low%20resolution.pdf (accessed April 10, 2019), p. 172. According to a WaterAid resource, Menstrual Hygiene Matters, research shows that menstrual cramps affect at least 50 percent of women in their reproductive age, with a direct impact on their ability to work and workplace absenteeism. Menstrual cramps may be accompanied by other symptoms such as nausea, vomiting, diarrhea, headaches, weakness, and/or fainting.

[127] Ibid.

[128] Human Rights Watch group discussions with 11 workers from different factories in Myanmar, and three and five workers from the same factory in Bangalore, May 2018.

[129] Human Rights Watch group interviews with three and five workers from the same factory in Bangalore, ibid.

[130] Human Rights Watch, “Work Faster or Get Out:” Labor Abuses in Cambodia’s Garment Industry; “No Room to Bargain”: Unfair and Abusive Labor Practices in Pakistan.  

[131] “ILO Supplier Survey on Purchasing Practices, 2016,” pp. 19-20.

[132] See for example, C&A, “Ensuring Adherence to the Code of Conduct,” Code of Conduct for the Supply of Merchandise, April 2015, http://sustainability.c-and-a.com/fileadmin/user_upload/materialimpacts/... (accessed April 8, 2019), ; Inditex, “Code of Conduct for Manufacturers and Suppliers: Inditex Group,” https://www.inditex.com/documents/10279/241035/Inditex+Code+of+Conduct+f... (accessed April 8, 2019), clause 10, p. 6.

[133] Human Rights Watch phone interviews with Shelly Gottschamer; HU, GH, LO, DN who requested anonymity, sourcing experts.

[134] Human Rights Watch phone interview with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous international garment brands, London, January 15, 2019.

[135] Ibid.

[136] ILO, “Cambodian Garment and Footwear Section Bulletin,” Issue 6, May 2017, http://ilo.org/wcmsp5/groups/public/---asia/---ro-bangkok/documents/publication/wcms_555290.pdf (accessed April 8, 2019), p. 4.

[137] Human Rights Watch interviews with workers in three factories, Phnom Penh, April 2014.

[138] Human Rights Watch interviews with workers from six subcontractor factories, Phnom Penh and Kandal, April 2014 and June 2016.

[139] Human Rights Watch interviews with two union leaders from the Coalition of Cambodian Apparel Workers' Democratic Union, Kandal, June 27, 2016.

[140] For example, see List of Garment Factory Accidents in Bangladesh, 2013-2017, https://static1.squarespace.com/static/547df270e4b0ba184dfc490e/t/5ac559... (accessed April 8, 2019);

[141] “Accord on Fire and Building Safety in Bangladesh,” http://bangladeshaccord.org/ (accessed April 8, 2019).

[142] “Alliance for Bangladesh Worker Safety,” April 2013, http://www.bangladeshworkersafety.org/ (accessed April 8, 2019). 

[143] International Finance Corporation (IFC) and International Labour Organization, “Remediation Financing in Bangladesh’s Ready Made Garment Industry: An Overview,” June 2016, https://www.ifc.org/wps/wcm/connect/650e70d9-3744-41ff-875a-a790840b23b8... (accessed April 8, 2019), p.2. An IFC report described the National Tripartite Plan of Action on Fire Safety and Structural Integrity (NTPA) as working with “smaller international brands that exhibit comparatively less concern for safety and labor law compliance.”

[144] Bangladesh Accord on Fire and Building Safety, Art. 22 (on file with Human Rights Watch).

[145] Bangladesh Accord on Fire and Building Safety, “Finance for Remediation to Accord Standards” (on file with Human Rights Watch).

[146] Ibid.

[147] IndustriALL, “Bangladesh Accord arbitration cases - resulting in millions-of-dollars in settlements - officially closed,” July 18, 2018, http://www.industriall-union.org/bangladesh-accord-arbitration-cases-resulting-in-millions-of-dollars-in-settlements-officially (accessed April 8, 2019).

[148] Human Rights Watch interview with NN who requested anonymity, an expert who is closely involved in monitoring the functioning of the Bangladesh Accord, December 11, 2018.

[149] For example, see Clean Clothes Campaign et al., “The Bangladesh government attempts to paralyze Accord and strip its independence,” December 10, 2018, https://cleanclothes.org/news/2018/12/10/bangladesh-government-attempts-to-paralyze-accord-and-strip-its-independence (accessed April 8, 2019). “The Accord has been instrumental in radically improving the safety of garment factories in Bangladesh since it was established in the wake of the Rana Plaza factory collapse in 2013 that claimed over a thousand lives. The Accord has identified more than 100,000 fire, building, and electrical hazards and the large majority have been rectified… Despite this progress, dangers remain and workers’ lives are still at risk. Over 50% of the factories still lack adequate fire alarm and detection systems and 40% are still completing structural renovations.”

[150] ILO and IFC, “Remediation Financing in Bangladesh’s Ready Made Garment Industry: An Overview,” p. 2.

[151] Ibid.

[152] Ibid., p. 37.

[153] Ibid., p. 42.

[154] Center for Global Workers’ Rights, “Binding Power: The Sourcing Squeeze, Workers’ Rights, and Building Safety in Bangladesh Since Rana Plaza,” March 22, 2018, http://lser.la.psu.edu/gwr/documents/CGWR2017ResearchReportBindingPower.pdf (accessed April 8, 2019), pp. 5-7. The Center for Global Workers’ Rights documented a 13 percent decline in the prices paid by buyers in Bangladesh to produce trousers exported to the US. Based on a supplier survey of 211 Bangladesh suppliers of international apparel brands, the center concluded that “in all major product categories we find a decline in nominal prices paid per unit [garment].” Between 2011 and 2016, the price drop for garments exported to the US was about 11 percent, in comparison to a 9 percent decline for EU apparel exports.

[155] ILO Survey, 2016, p. 8. 52 percent of suppliers from Bangladesh (across different sectors) reported that they accepted orders below production costs because of buyer pressure.

[156] Human Rights Watch phone interview with industry expert who has worked in Bangladesh and other countries (name withheld on interviewee’s request), Hong Kong, December 16, 2018.

[157] Human Rights Watch interviews with supplier 1 who requested anonymity, group that operates garment factories in China, Southeast Asia, and South Asia supplying 17-20 international apparel brands, Southeast Asia, April and May 2018.

[158] Ibid.

[159] Human Rights Watch, “Work Faster or Get Out”: Labor Rights Abuses in Cambodia’s Garment Industry, p. 120; Human Rights Watch interviews with A1, auditor who has conducted social audits of factories in Pakistan, India, and Vietnam, April 2018.

[160] Human Rights Watch group interview with Vinutha V. (pseudonym) and two other workers from a factory in India, Bangalore, May 13, 2018. 

[161] Human Rights Watch group interview with 12 workers from six factories in Myanmar, May 19, 2018.

[162] Ibid.

[163] Human Rights Watch group interview with six workers from two factories in Myanmar, May 20, 2018.

[164] Human Rights Watch phone interview with HU who requested anonymity, an industry expert with experience of conducting thousands of social audits and also working with brands and suppliers, US, January 31, 2019.

[165] Office of the United Nations High Commissioner for Human Rights, “Guiding Principles on Business and Human Rights,” New York and Geneva: 2011, principle 15, https://www.ohchr.org/documents/publications/GuidingprinciplesBusinesshr_eN.pdf (accessed April 10, 2019), p. 15.

[166] Ibid., principle 17, p. 17.

[167] Ibid., principle 21, p. 24.

[168] “Guiding Principles on Business and Human Rights,” principle 19 commentary, p. 21.

[169] The Joint Ethical Trading Initiatives, “Guide to Buying Responsibly,” 2017, Section 2, https://www.ethicaltrade.org/sites/default/files/shared_resources/guide_to_buying_responsibly.pdf (accessed April 8, 2019).

[170] Human Rights Watch phone interview with DN who requested anonymity, industry expert with more than 25 years of experience sourcing apparel, footwear, and non-apparel products for numerous international garment brands, London, January 15, 2019.

[171] For more information about the ACT Initiative and their commitments, see subsection “Participating in Collective Brand Initiatives Developed with Worker Representatives.”

[172] Fair Labor Association, “Adidas Group: Reassessment for Accreditation,” October 2017, http://www.fairlabor.org/sites/default/files/documents/reports/adidas_re... (accessed April 8, 2019).

[173] adidas, “Global Policy Manual Responsible Sourcing and Purchasing Policy,” July 1, 2017, https://www.adidas-group.com/media/filer_public/ca/ba/caba936a-7da7-4710-9d88-d437bac87923/adidas_responsible_sourcing___purchasing_policy_en.pdf (accessed April 8, 2019).

[174] Fair Labor Association, “Current FLA participating companies and suppliers,” http://www.fairlabor.org/affiliates/participating-companies (accessed April 8, 2019). Each affiliate’s reports are available on this page; “Resources: Performance Checks,” Fair Wear Foundation, https://www.fairwear.org/resources/?type=brand-performance-checks (accessed April 8, 2019). 

[175] “Guiding Principles on Business and Human Rights,” principle 17 commentary, p. 18.

[176] “Guiding Principles on Business and Human Rights,” principle 18, p. 19.

[177] Ibid., principle 18 commentary, p. 20.

[178] Human Rights Watch interviews with nine suppliers in Southeast Asia and South Asia, 2018. These suppliers were willing to give us information only after we assured them that we would not seek any specific brand information in order to ensure that nothing they said would affect their business relationships.

[179] Organisation for Economic Co-operation and Development (OECD), “OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector,” 2017, https://mneguidelines.oecd.org/oecd-due-diligence-guidance-garment-footwear.pdf (accessed April 8, 2019), p. 73.

[180] Better Buying Purchasing Practices Index Fall 2018, p. 23. These are: Bestseller A/S; G-Star Raw C.V.; Mountain Equipment Co-op; New Balance Athletics, Inc.; Nike Inc.; O’Neill Europe BV; Outerstuff LLC; Reformation; Rohan Designs Ltd.; Schijvens Confectiefabriek Hilvarenbeek B.V.; Whistles Ltd.; Bonmarché Ltd.; Frankonia Handels GmbH & CO. KG; JP Boden & Co Ltd.; N Brown Group; We Europe BV; White Stuff; Kmart Australia Ltd.; Target Corporation; The White Company (UK) Ltd.

[181] Doug Miller and Klaus Hohenegger, “Redistributing value added towards labour in apparel supply chains: Tackling low wages through purchasing practices,” International Labour Organization, Inclusive Labour Markets, Labour Relations and Working Conditions Branch, 2016, https://www.ilo.org/wcmsp5/groups/public/---ed_protect/---protrav/---tra... (accessed April 8, 2019), p. 19. Human Rights Watch interviews with supplier 1, Southeast Asia, May 2018, and human resources official from supplier 9 who requested anonymity, Pakistan, September 2018. “ACT Cambodia: The link between national collective bargaining and international purchasing practices,” and “Monitoring Purchasing Practices,” sessions at the OECD Forum on Due Diligence in the Garment and Footwear Sector, February 13-14, 2019.

[182] “Action, Collaboration, Transformation (ACT),” https://actonlivingwages.com/ (accessed April 8, 2019). 

[183] It includes memorandums of understanding between brands and worker representatives (global union IndustriALL) that do not have legally binding dispute resolution mechanism such as arbitration should a brand renege on its commitments.

[184] “ACT Brand Commitments: What do they mean in practice?” ACT, https://actonlivingwages.com/act-brand-commitments-what-do-they-mean-in-practice/ (accessed April 8, 2019). ACT says: “A comprehensive and transparent monitoring and accountability mechanism for both sets of commitments is currently being developed.” These include country-specific commitments and global commitments. 

[185] These are Arcadia, ASOS, Bestseller, C&A, Cotton On Group, Debenhams, Esprit, H&M, Inditex, K-Mart Australia, N Brown Group, New Look, Next, Pentland Brands, Primark, PVH, Target, Tchibo, Tesco, Topshop and Topman, zLabels.

[186] “ACT Member Brands Adopt Global Purchasing Practices Commitments,” ACT, December 2018, https://actonlivingwages.com/news-on-global-purchasing-practices-commitments/ (accessed April 8, 2019).

[187] Ibid.

[188] “Country Support Commitments,” ACT, https://actonlivingwages.com/wp-content/uploads/2018/11/Country_Support_... (accessed April 8, 2019).

[189] “About Us,” ACT, https://actonlivingwages.com/about-us/ (accessed April 8, 2019).

[190] “Using Due Diligence in Labour Costing To Meet Wage Compliance,” Fair Wear Foundation, 2018, https://www.fairwear.org/resource/using-due-diligence-in-labour-costing-... (accessed April 8, 2019).

[191] “Countries,” Fair Wear Foundation, https://www.fairwear.org/countries/ (accessed April 8, 2019). These are Bangladesh, Bulgaria, China, India, Indonesia, Macedonia, Myanmar, Romania, Tunisia, Turkey, and Vietnam.

[192] See Human Rights Watch et al., Follow the Thread: The Need for Supply Chain Transparency in the Garment and Footwear Industry, April 2017, https://www.hrw.org/report/2017/04/20/follow-thread/need-supply-chain-transparency-garment-and-footwear-industry for a description of the Transparency Pledge.

[193] “Guiding Principles on Business and Human Rights,” principle 20, p. 22.

[194] Ibid.

[195] OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, p.73.

[196] New York University (NYU) Stern Center for Business and Human Rights, “A new approach to evaluating company social performance,” June 14, 2018, https://bhr.stern.nyu.edu/blogs/2018/6/14/a-new-approach-to-evaluating-c... (accessed April 8, 2019).

[197] Ibid.

[198] “Guiding Principles on Business and Human Rights,” principle 21, p. 23.

[199] See for example, “KnowtheChain,” https://knowthechain.org/themes/38/ (accessed April 8, 2019) which gives an overview of companies that have disclosed some information about their purchasing practices.

[200] Fair Labor Association (FLA), http://www.fairlabor.org/ (accessed April 10, 2019). The FLA is a US-based multi-stakeholder organization. It has about 40 US apparel companies as its members. These companies produce in 4,000 factories globally that employ over 4.5 million workers. The Fair Wear Foundation (FWF), https://www.fairwear.org/. The FWF is a Netherlands-based multi-stakeholder organization which has more than 100 apparel companies as its members. Many of them are small and medium enterprises.

[201] See for example, Fair Labor Association, “Adidas Assessment for Reaccreditation, October 2017,” http://www.fairlabor.org/report/adidas-assessment-reaccreditation-october-2017 (accessed April 10, 2019); “Patagonia Assessment for Reaccreditation, October 2017,” http://www.fairlabor.org/report/patagonia-assessment-reaccreditation-october-2017 (accessed April 10, 2019), “Accreditation Assessment of Hugo Boss's Social Compliance Program, February 2018,” http://www.fairlabor.org/report/accreditation-assessment-hugo-bosss-soci... (accessed April 8, 2019); “Nike Inc., “Assessment for Reaccreditation, February 2019,” http://www.fairlabor.org/sites/default/files/documents/reports/nike_reaccreditation_report_final.pdf (accessed April 8, 2019); “Under Armour, Inc. Assessment for Accreditation, February 2019,” http://www.fairlabor.org/sites/default/files/documents/reports/under_armour_accreditation_report_final_public.pdf (accessed April 8, 2019).

[202] For example, the assessment report for New Balance states that “New Balance is the sole or primary buyer in its contract footwear facilities and therefore has more leverage as well as more responsibility to ensure reliability of orders to maintain a steady workforce.” How much leverage a brand has vis-à-vis a factory enhances the brand’s ability to influence factory working conditions. But this information is not consistently presented across all FLA apparel and footwear brands. Fair Labor Association, “New Balance Athletics, Inc. Assessment for Reaccreditation,” October 2018, http://www.fairlabor.org/sites/default/files/documents/reports/new_balance_reaccreditation_report_public_edits_final.docx_.pdf (accessed April 10, 2019), p. 14.

[203] “Brand Performance Check Guide,” Fair Wear Foundation, 2015, https://www.fairwear.org/wp-content/uploads/2011/12/online-brand-performance-check-guide-2016.pdf (accessed April 8, 2019), pp. 27-46. The Fair Wear Foundation produces the full report for each brand on its website: https://www.fairwear.org/resources/?type=brand-performance-checks.

[204] Ibid. “Percentage of production volume from production locations where member company buys at least 10 percent of production capacity; Percentage of production volume from production locations where member company buys less than 2 percent of its total FOB; Percentage of production volume from production locations where a business relationship has existed for at least five years.”

[205] Ibid. “Member company’s pricing policy allows for payment of at least the legal minimum wages in production countries.”

[206] Ibid. “The member company’s production planning systems support reasonable working hours; Degree to which member company mitigates root causes of excessive overtime; Degree to which member company assesses root causes of wages lower than living wages with suppliers and takes steps towards the implementation of living wages.”

[207] For example, the OECD Due Diligence Guidance for Responsible Supply Chains in Garment and Footwear recommends that brands also track the extent to which the actual orders diverge from the projected orders and the development of a responsible exit strategy.

[208] “Better Buying.”

Posted: January 1, 1970, 12:00 am

Czech Republic's President Milos Zeman speaks during the inaugural Belt and Road Forum for International Cooperation in Beijing Sunday, May 14, 2017.

© 2019 Lintao Zhang/Pool Photo via AP

(New York) – The Chinese government should ensure the projects it finances or engages in under the Belt and Road Initiative (BRI) respect human rights, Human Rights Watch said today. On April 25-27, 2019, President Xi Jinping will host heads of state and international organization leaders at the second Belt and Road Forum for International Cooperation in Beijing. The BRI, announced in 2013, is China’s trillion-dollar infrastructure and investment program stretching across some 70 countries, linking China to the rest of Asia, Africa, and Europe via land and maritime networks.

Under the Belt and Road Initiative, the Chinese government should set out requirements to enable meaningful consultation with groups of people potentially affected by proposed projects. It should also ensure that affected communities can openly express their views without fear of reprisal. Other governments, the United Nations, and financial institutions should press Beijing to adopt such protections.

“Beijing claims it is committed to working with other countries to foster environment-friendly and sound development, but the practice so far has raised some serious concerns,” said Yaqiu Wang, China researcher at Human Rights Watch. “Criticisms of some Belt and Road projects – such as lack of transparency, disregard of community concerns, and threats of environmental degradation – suggest a superficial commitment.”

In recent years, some BRI projects have not conducted or disclosed adequate environmental and social impact assessments, or sufficiently consulted local communities that would be affected by the projects during planning and construction processes, prompting widespread protests.

Such practices are inconsistent with basic obligations of states under international human rights law concerning a healthy and sustainable environment. Some BRI projects have also drawn criticism for facilitating corruption, nontransparent loan agreements, and noncompetitive contracts that require the use of Chinese companies. Amid inflated project costs, several BRI recipient countries, such as Djibouti, Pakistan, and the Maldives, are at high risk of debt distress, potentially diverting limited government resources away from essential services to debt servicing.

The China Development Bank and the Export-Import Bank of China, two of China’s policy banks and the biggest financiers of the BRI, have not publicly articulated mechanisms to ensure transparency, accountability, or respect for human rights in financing BRI projects. A policy document issued in 2017 by the Office of the Leading Group for the Belt and Road Initiative, the government body that oversees implementation of the BRI, made no mention of human rights.

In Pakistan, the Chinese government has made developing the port city of Gwadar the centerpiece of the China-Pakistan Economic Corridor, a flagship BRI project totaling US$62 billion. In 2015, as part of the project, the Chinese government offered a loan of $130 million to build the East Bay Expressway, which will link the port to a major national highway. Since the Chinese state-owned China Communications Construction Company (CCCC) started construction on the highway in October 2018, local fishermen in Gwadar have raised concerns about the lack of transparency and consultations, and potential impacts on their livelihoods. They have held news conferences, strikes, and marches to protest the highway, which they allege would block their access to the sea and deprive them of their ancestral source of livelihood without offering any alternatives. Pakistani Prime Minister Imran Khan assured “inclusive development” but construction has proceeded without any of the fishermen’s demands being addressed.

In Myanmar, the Chinese government has ramped-up pressure on Myanmar authorities over the $3.6 billion Myitsone Dam project in Kachin State. The Myanmar government suspended the construction of the dam in 2011, after nationwide protests. Critics say the mega-dam would cause large-scale displacement, loss of livelihoods, wide-scale environmental damage, and destruction of cultural heritage sites significant to the ethnic Kachin people. The project has been criticized for having little transparency. In February, a Chinese government statement contending that most Kachin people support the revival of the dam project drew thousands of people to march in opposition to the claim. The Myanmar government briefly detained a protest leader.

In Sri Lanka, the CCCC in January completed the first phase of construction of Colombo Port City, a financial district in the country’s capital. The $1.4 billion development project has drawn continuing protests over environmental harm. Many residents fear that land reclamation required for the project would lead to coastal erosion and reduce fish populations, threatening the lagoon ecosystem and fishermen’s livelihoods. As with many other BRI projects, the agreement between the Sri Lankan government and the CCCC has not been made public.

The Chinese government and state-owned banks have responded to community opposition to planned Belt and Road projects in some cases. In March, Chinese authorities dropped a plan to blast rocky outcrops and islets in the upper reaches of the Mekong River to allow smooth passage of large cargo vessels, after strong protests by residents and environmental groups from Laos, Myanmar, and Thailand. Also in March, the state-owned Bank of China said it would evaluate the funding commitment to the Batang Toru hydropower plant in Indonesia, asserting that the bank was committed to supporting environmental protection and corporate social responsibility. Critics fear the dam would cause environmental degradation and threaten the critically endangered orangutan.

“People and governments in some ‘Belt and Road’ countries are pushing back against threats to their physical, financial, and environmental well-being,” Wang said. “Chinese authorities should respond by committing to meaningful community consultation, project transparency, respect for peaceful protest, and addressing community concerns.”

Posted: January 1, 1970, 12:00 am

Women carrying bags of cotton to be weighed and loaded onto a truck in Jizzakh region during the 2016 cotton harvest. The government typically requires people to meet a daily quota of cotton picked, from which the costs of food and transport are deducted. If they do not meet the quota, they can go into debt.

© 2016 UGF
Despite a slew of steps taken to curb the practice, forced labor in Uzbekistan’s cotton fields remains widespread, according to a recently released report.

The Uzbek-German Forum for Human Rights (UGF), which has been monitoring Uzbekistan’s cotton sector for ten years, reported earlier this month that despite reforms taken by President Shavkat Mirziyoyev’s government, citizens are still being forced to work in the annual harvest. While medical workers and teachers were not forced en masse to work in the cotton fields for the past two harvest seasons, local government officials increasingly extorted employees of state-owned companies to do the work.

The Mirziyoyev government’s efforts to reduce forced labor, such as increased engagement with civil society activists, higher wages for cotton pickers, and awareness campaigns about the legal consequences of using forced labor are tangible steps forward. But if forced labor is to be eliminated, the government has to end the centrally mandated production quotas that fuel the practice.

Both the International Labour Organization (ILO) and UGF independently found evidence of large-scale forced labor in Uzbekistan in 2018. The ILO estimates about 170,000 adults were forced to work during the 2018 harvest. Instead of being driven at the national level, the ILO said that most of the push for forced labor is happening at the local level. However, UGF found the central government continues to facilitate forced labor through practices such as the forcible transfer of laborers to areas with worker shortages. While local government officials are responsible for much of the current mobilization of forced labor to meet production quotas, the central government has failed to reign in abusive practices and the structures that sustain them, indicating just how deeply rooted and persistent the practice is.

Forced labor is just one of many serious labor issues in Uzbekistan, which include the lack of freedom for voluntary laborers to join independent unions. Good faith efforts by the Mirziyoyev government to address the structural drivers of forced labor are an important measure that, when realized, can open the door to further reform in Uzbekistan’s labor market overall.

Author: Human Rights Watch
Posted: January 1, 1970, 12:00 am

Community activists in mining areas face harassment, intimidation, and violence, the Centre for Environmental Rights, groundWork, Earthjustice, and Human Rights Watch said in a joint report released today. The attacks and harassment have created an atmosphere of fear for community members who mobilize to raise concerns about damage to their livelihoods from the serious environmental and health risks of mining and coal-fired power plants. 

The video cites activists’ reports of intimidation, violence, damage to property, use of excessive force during peaceful protests, and arbitrary arrest for their activities in highlighting the negative impacts of mining projects on their communities. Municipalities often impose barriers to protest on organizers that have no legal basis. Government officials have failed to adequately investigate allegations of abuse, and some mining companies resort to frivolous lawsuits and social media campaigns to further curb opposition to their projects. The government should protect the activists.

Posted: January 1, 1970, 12:00 am

What changes for a community once a mine starts operating?

Most mining in South Africa takes place in rural areas, where people live off the land and their livestock. Mining often forces people to leave the land they use for farming and grazing. Mining companies by law are required to make binding commitments for projects that will benefit a community that will be affected by mining. Our experience, however, is that the communities are rarely consulted and, as the South African Human Rights Commission has found in a recent report, compliance with these so-called Social and Labor Plans is poor. In the end, we don’t believe that the plans prioritize the needs of the community and often although local residents were promised employment, it goes instead to people from outside who have the required skills. Few people from the community in practice land a job with the mine.

Also, until recently, the government has allowed mines to operate on lands governed by customary or traditional laws without consulting with or seeking the consent of the communities living on them. In fact, the government has used mining laws to override legal protections for informal land rights. And although people have a right to be compensated for the loss of land even in the absence of formal land titles, we know of several cases in which no compensation was paid.

As a result, we find that the majority of those living near mines are left worse off than before because they no longer have enough land to farm. And to make matters worse, many end up breathing coal dust, getting sick, and their houses, most of which are made of clay, are cracking because of the blasting.

What are people’s biggest concerns?

One of the major concerns is water scarcity. Mines need millions of liters of water to wash coal. I remember one case where, during a drought, the community said the coal mine blocked off the entire stream that was their water source.

Video

South Africa: Activists in Mining Areas Harassed

Community activists in mining areas face harassment, intimidation, and violence, the Centre for Environmental Rights, groundWork, Earthjustice, and Human Rights Watch said in a joint report released today. The attacks and harassment have created an atmosphere of fear for community members who mobilize to raise concerns about damage to their livelihoods from the serious environmental and health risks of mining and coal-fired power plants.

Pollution from insufficiently treated effluents - water that runs off after the coal has been washed and that contains toxic substances - and the pollution of streams and boreholes from acid mine drainage are another worry. In places like Witbank in Mpumalanga, where there are many active and abandoned coal mines, people’s tap water is undrinkable. Their only option is to buy water. Yet these are people who cannot even afford the most basic things like sufficient food or primary healthcare.

Exposure to coal dust compromises people’s health. When inhaled, this very fine dust can cause respiratory problems, coughs, and trigger asthma. People end up having to see doctors, which is another expense they cannot afford.

Does the government listen when people voice these concerns?

Local and national government officials rarely respond to formal complaints. A community’s last resort is to take the mine to court. But this takes resources most communities don’t have.

At the end of the day, people are angry. When no one ever responds to their grievances, they resort to protests. It’s only then that the municipalities react – by sending in the police.

Our constitution is very clear. Everyone has the right to peacefully protest without needing to obtain permission to do so. Municipalities, however, insist that unless communities have been granted a formal permission, their protest is illegal. The police are brought in, shoot teargas and rubber bullets into the crowd, and arrest whoever gets in their way. The municipalities will claim the protest was violent and all they were doing was trying to enforce the law. Most protests, however, are peaceful, and most arrests are baseless.  

How do the mining companies respond?

In our work with communities at groundWork we have found that some mines will do anything to discourage people from voicing their concern. They encourage the narrative that anti-mining protests will scare off investors. They want the police to react quickly and decisively. And they put activists at risk by claiming they are destructive and endanger the national interest. In one case, activists told us that they even went so far as to hire small groups of people to gather information about “trouble-makers”.

How dangerous is it to be an activist who challenges mining projects in South Africa?

In KwaZulu-Natal, a province with a violent history and hit-men for hire, the threats activists receive are very real. In Somkhele, an activists’ car was set alight, and at night, he was woken up by gun shots. Somebody tried unsuccessfully to burn his house down. In the morning, he found a dead cat in his yard, he thought it was a warning. Many activists have received anonymous calls threatening that they will be “dealt with”. A female activist and single mother felt so threatened by death calls that she moved herself and her daughter out of the village. Apparently, the village headman was not happy with her opposition to the mine.

What threats have you personally experienced in the course of your work?

A female activist in Mpumalanga had asked us to provide the community with more information about how a proposed coal mine might affect them. The village was in quite a secluded area. Suddenly, a group of armed men burst into the meeting, accusing us of being sell-outs, more concerned about the environment than development. The men did not even come from the community, but in the end, they had whipped up so much anger that 200 to 300 people were chanting the names of our organizations and pointing fingers at us. We felt very threatened and very concerned about the local activist who had invited us. Anything could have happened at that moment. There could have been shooting. So we decided to leave the meeting before the crowd moved outside, gave the lady who had invited us a lift home. and drove off.

Could you do anything to help keep the local activist safe?

We considered relocating her, but she did not want to move. So we bought her a cell phone and checked in on her regularly to make sure she was safe. As a woman she was particularly vulnerable, and we felt she was underestimating the threat. But eventually the situation calmed down.

How do these threats and attacks affect those opposed to mining?

The threats diffuse their courage and passion. There are people, especially the leadership, who say I don’t care, I can die for the truth. But others feel they need to retract. Some have families or dependents they have to look after. They know that anything can happen to them. And there are no security measures in place that make them feel protected.

Do the police not investigate?

Police will break up a protest, but they do nothing when activists who oppose mining are threatened. I don’t know of a single case that has been properly investigated. Not even when people were killed. Take the case of Sikhosiphi “Bazooka” Rhadebe, the chairperson of a community-based organisation in Xolobeni, Eastern Cape. He had raised concerns about a titanium mine that Australian company Mineral Commodities Ltd has proposed. Three years after his murder no one has been arrested.

Activists from mining communities protesting at the Pietermaritzburg High Court on August 24, 2018, KwaZulu-Natal.

© 2018 Rob Symons

Some communities have taken the government to court. What was the outcome?

In August last year, the Xolobeni community took the government to court arguing the community should have the right to decide what happens to the land their families have lived on for generations. The court ruled that customary land is only held in trust and that the South African Department of Mineral Resources cannot issue a mining license without the community’s consent. And last November, the Constitutional Court ruled that “restrictions [of protests] that are “blanket in nature” and criminalise gatherings “as an end in itself” are unconstitutional. This means that the protesters can no longer be prosecuted as a criminal offense, whether registered or not. These decisions are significant for the struggle.

What needs to change?

The government should take the injustices committed by corporations seriously. The Minister of Mineral Resources should ensure that issues raised by communities are addressed. The police need to understand that when people are protesting they are not criminals but human beings who care about their communities. And prosecutors should be trained in how to assess the validity of an arrest. We need to resolve these issues in ways that build trust with and calm down these angry communities who feel that, if they don’t fight for their rights, nobody will.

*This interview has been edited and condensed

**groundWork is one of four partners who researched the threats to activists in South Africa’s mining communities, resulting in a joint report “We Know Our Lives Are in Danger” and video. Other partners were Earthjustice, Centre for Environmental Rights and Human Rights Watch.

Author: Human Rights Watch, Human Rights Watch
Posted: January 1, 1970, 12:00 am

Dear Mr. Peel,

We write in reply to your March 1, 2019 letter, which responded to our open letter of February 18, 2019 raising concerns around the acquisition by Novalpina Capital of a stake in NSO Group.

We welcome Novalpina Capital’s affirmation of the UN Guiding Principles on Business and Human Rights (UNGPs) and the UN-supported Principles for Responsible Investment. We are encouraged about your commitment to ensure NSO Group operates in accordance with the UNGPs, including through “robust transparency in line with those Principles,” and we urge you to respect and deliver on that commitment. Surveillance technology firms should robustly embrace the UNGPs and its provisions on transparency, accountability, and remedy.

Surveillance technology interferes with the human rights to privacy and to freedom of opinion and expression when it is used in a manner not prescribed by law, is not strictly necessary to meet a legitimate aim, or is not deployed in a manner that is proportionate to that aim. To date, the surveillance industry remains an opaque, reckless, and often defiant business sector, lacking leadership in respecting human rights and addressing harms. This includes NSO Group’s previous owner, Francisco Partners, which rebuffed efforts at outreach, seemingly ignored or dismissed peer-reviewed academic work, and failed to respond to public letters. This blatant disregard for any public engagement and accountability must stop.

We appreciate your stated commitment to constructive dialogue and provision of some additional detail concerning Novalpina’s acquisition of a majority stake in NSO Group and due diligence undertaken prior to the deal. However, the undersigned organisations remain concerned on several points, as articulated in full in the attached Appendix.

Prior to setting a meeting, we request that Novalpina Capital respond in writing regarding, at a minimum, the following critical issues:

Acquisition details. You stated in your letter that you would not be able to disclose certain information related to the company and acquisition because the acquisition had not yet closed. In light of this we request information on the timeline of the acquisition, including the anticipated date of closing, and when we might expect additional details regarding corporate structure, governance processes, and operating procedures.

Statement regarding targeting of civil society. It is concerning to the undersigned organizations that Novalpina Capital made no statement regarding the targeting, by private investigators, of civil society who were investigating, reporting on, or involved in legal actions against NSO Group, as requested in our February 18 letter. Please indicate your position on such targeting.

Documentation of due diligence and investigation of reports of misuse. We support Citizen Lab in its call for Novalpina Capital to provide concrete documentation regarding its due diligence and other efforts to address reports of misuse. Our approach is complementary and in coalition with them. As Citizen Lab’s Director notes, you have not provided any evidence to support the claim that the organization’s conclusions or research are flawed. We request that you provide such documentation in support of your assertions. Please include details on the steps Novalpina Capital takes to identify and address potential and actual human rights impacts of its activities, products and services, including those of its portfolio company NSO Group.

Public commitment to cooperate with official investigations in Mexico. Novalpina Capital made no mention of its commitment to cooperate with ongoing investigations regarding abuses associated with NSO Group’s spyware in Mexico. Please indicate your position on this request.

We also welcome any additional response you may have at this time to the concerns raised in the Appendix.

Signed,

Amnesty International

Access Now

Committee to Protect Journalists

Human Rights Watch

Privacy International

R3D: Red en Defensa de los Derechos Digitales

Reporters Without Borders

Robert L. Bernstein Institute for Human Rights, NYU School of Law and Global Justice Clinic, NYU School of Law*

*Communications from NYU clinics and institutes do not purport to reflect the school's institutional views, if any.

 

APPENDIX

Original requests of the NGO Coalition and Novalpina Capital’s response

We lay out below the original requests contained in our February 18 letter, reactions as to whether Novalpina Capital satisfied these requests in its March 1, 2019 letter, and further questions raised by the Novalpina Capital letter:

  1. Confirm an immediate end to the sale or further maintenance of NSO Group products and services to governments that have been accused of intentionally infringing human rights through communications surveillance;

Novalpina Capital did not take a position on whether NSO Group would proactively refuse to supply its products to governments accused of intentionally infringing human rights through communications surveillance. Rather, it asserts the company’s reliance on its Business Ethics Committee (BEC), “a key Committee of the NSO Board,” for review of its sales. The letter provides no indication of clear and consistent human rights-based benchmarks or policies applied to company sales and services, or examples of instances where NSO Group has refused to supply a product or suspended a sale agreement based on human rights concerns. Indeed, nothing in the letter counters the impression that decisions of the BEC are entirely subjective, non-transparent, and lacking in any oversight.

Additionally, it is unclear from your letter whether or not any of the NSO Group board members also sit on the BEC. If this were to be the case, we would be concerned about the conflict of interest this represents. Without publicly stating who sits on the BEC, explaining the BEC’s methodology and criteria for making decisions, naming a single BEC member with expertise in human rights, or committing to establish independent oversight of the company’s approach to human rights, it is impossible for civil society to have trust in the BEC or the board generally.

Novalpina Capital also did not commit to ending further support for NSO Group products and services to governments that have been accused of intentionally infringing human rights through communications surveillance. The letter states that the company could end support to governments based on “proven misuse of NSO’s technology,” as established through a process undertaken with “the permission of the end-user organisation under investigation.” A process requiring “proof” of misuse that depends on the cooperation of a government client may make it difficult, if not impossible to actually investigate those claims. Therefore, we are unclear as to whether this is an adequate safeguard when the end-user is accused of misusing the technology. Please elaborate on how this policy is enforced in practice.

  1. Commit to fully engaging with relevant investigations into abuses associated with NSO Group’s spyware in Mexico, and publicly outline what steps will be taken to cooperate with investigations to provide accountability and remediation;

Novalpina Capital did not reference alleged abuses associated with NSO Group’s spyware in Mexico or any cooperation with ongoing investigations. Instead the company said it did not find “anything to substantiate the misuse allegations.” It would be helpful to specify what allegations were being referenced and how the company made those determinations.

  1. Detail what human rights due diligence steps were taken ahead of making the decision to proceed with the acquisition, report publicly on what risks were identified through any such due diligence process and how they were addressed;

Novalpina Capital provided some information concerning the due diligence it undertook in deciding to proceed with an acquisition of NSO Group. However, we view the steps taken as described by Novalpina Capital as inadequate to address human rights concerns. In particular:

  • Prior to entering into any business relationship, including pursuing an acquisition, companies have a responsibility to carry out robust human rights due diligence, which, under the UNGPs, should take place “as early as possible in the development of a new activity or relationship, given that human rights risks… may be inherited through mergers or acquisitions” (Commentary, Principle 17). Yet Novalpina Capital did not provide adequate information to show that due diligence was undertaken.
  • Novalpina Capital has failed to consult with civil society experts and affected stakeholders prior to entering into a purchase agreement, despite the serious and widely publicized concerns about NSO Group’s human rights record. Novalpina Capital’s letter asserts that its due diligence process was informed by the UNGPs, yet Principle 18 states that human rights due diligence should “involve meaningful consultation with potentially affected groups and other relevant stakeholders.” This is a crucial component of the process, and the fact that it did not take place before the acquisition was publicized undermines Novalpina Capital’s credibility regarding its commitment to identifying and addressing human rights concerns.
  • Novalpina Capital has not publicly disclosed the steps the company took to identify and address potential and actual human rights impacts associated with the activities of NSO Group before buying shares in this company, including publishing a list of risks and actual abuses identified. These are key transparency measures that the UNGPs encourage companies to take.
  • We are concerned that the individuals you highlighted among the ‘external advisers’ have existing relationships with Novalpina Capital. Prof. Dr. Gerhard Schmidt of the ‘legal compliance team’ mentioned in your letter is reportedly a non-executive chairman and director at Novalpina Capital Group S.à.r.l.; and Dr. Günter Schmid, who performed corporate governance due diligence, is reportedly on the supervisory boards of Olympic Entertainment Group AS and Odyssey Europe AS, as well as on the management board of Odyssey Europe Holdco S.à r.l. – entities owned by Novalpina Capital.
  • Disclose additional information about the new corporate structure, including what percentage of shares of NSO Group Novalpina Capital now owns or controls; the precise terms of this deal; NSO Group’s new corporate structure; and the membership of NSO Group’s board of directors, executive leadership, and management team.

We acknowledge Novalpina Capital’s statement that, pursuant to agreements undertaken in furtherance of the acquisition, it cannot disclose certain information concerning the acquisition prior to its closing. Please inform us when we can expect to receive the information requested, as well as the anticipated date of closing.

  1. Describe its position on the human rights impact of NSO Group’s technology, and how it plans on mitigating the risks made evident by NSO Group's past failures and preventing abuses in the future;

We appreciate Novalpina Capital sharing context on the thinking behind its decision to invest in NSO Group, and the human rights impacts of NSO Group’s technology. We also appreciate Novalpina Capital’s description of its plans to mitigate the human rights risks associated with NSO Group’s products and services going forward, including by undertaking a human rights impact assessment. However, we still have concerns about the adequacy of these plans (see discussion below). 

  1. Provide details about the membership and deliberations of NSO Group’s Business Ethics Committee, and the standards against which they evaluate potential or past business;

Novalpina Capital provided limited details about NSO Group’s Business Ethics Committee. We have highlighted our concerns regarding the BEC in the discussion of request 1, above. Novalpina Capital did not provide information regarding the human rights or other standards (if any) against which the BEC evaluates potential or past business. 

  1. Issue a statement condemning the targeting, by private investigators, of civil society who were investigating, reporting on, or involved in legal actions against NSO Group;

Novalpina Capital has not made a statement regarding the use of private investigators to target civil society when they were investigating, reporting on, or involved in legal actions against NSO Group. Novalpina Capital’s silence on this matter undermines the credibility of Novalpina’s claims that it will address human rights and is troubling to this NGO coalition. Please indicate your position on such targeting.

  1. Provide data on which export licenses NSO Group has received from Israeli and other government authorities, and commit to regular transparency reporting on export licensing data;

Novalpina Capital provided some background information on NSO Group’s compliance with export control regulations, which we appreciate. It did not, however, provide data on the company’s export licenses. The letter also notes that “the very large majority of contracts . . . require an export license . . . .” This statement gives us cause for concern: are there contracts entered into by NSO Group that do not require an export license, and if so, on what basis? Further, your response states that NSO Group’s products are also licensed by non-Israeli government authorities, including in Bulgaria. We ask that you detail which countries provide NSO Group with export licenses, whether and how human rights considerations are applied to export license applications in these countries, and whether NSO Group requires a license to export to an authority in an EU member state from Bulgaria. Finally, Novalpina Capital did not commit to regular transparency reporting on NSO Group export licensing data.

  1. Provide details on end-use agreements that NSO Group has in place with its clients protecting people from arbitrary surveillance, if any, and what steps the company takes to monitor their compliance. If no end-use agreements are in place, provide information about how NSO Group ensures its products are not misused against human rights defenders, journalists, and other members of civil society.

Novalpina Capital stated that NSO Group maintains contracts with end-users that include compliance obligations and prohibitions against use of the technology in a manner that violates human rights. However, the company did not provide examples of these contracts. Please provide the relevant contractual provisions in full, as well as any provisions that may rely on or modify them, for avoidance of any ambiguity. It is also unclear whether standard-form contractual provisions may be modified pursuant to negotiations with clients; please provide clarification on that issue. Finally, Novalpina Capital did not provide information on how NSO Group monitors compliance with these provisions in the absence of a claim or suspicion of misuse; please inform us of what due diligence NSO Group carries out, either through regular audits or other processes, in order to monitor compliance with these provisions.

Novalpina Capital’s emphasis on ‘substantiation’

Novalpina Capital’s March 1, 2019 letter relies on the notion that ‘substantiation’ of concerns surrounding NSO Group’s human rights impact is a prerequisite to action. Citizen Lab has written separately to you regarding this issue, and we support the points made in the Citizen Lab letter. Additionally, we note that Novalpina Capital’s March 1 letter did not explicitly deny that NSO Group technology was utilized in the many incidents reported by Citizen Lab, Amnesty International, and others. Rather, the letter states: “We found no indication that the process followed by the company to investigate alleged misuse of its technology was partial or otherwise flawed, nor anything to substantiate the misuse allegations” (emphasis added). We request that you provide detailed clarification on the thresholds at which Novalpina Capital considers an allegation substantiated and a misuse to have occurred.

While Novalpina’s letter states that misuse allegations are not substantiated, it goes on to note that Novalpina Capital in fact identified three investigations that “led to NSO deciding to terminate a contract.” Were these investigations related to human rights impacts at all? If they were, this would be evidence of existing concerns around potential human rights impacts of NSO products. Please clarify.

Additionally, we consider problematic the statement that Novalpina Capital “will address the requirement for remediation (including for any substantiated historic abuses) as stipulated under the [UN Guiding] Principles” (emphasis added). However, the UNGPs’ approach to remedy does not require that those concerned over a company’s human rights impact substantiate a human rights abuse prior to seeking remedy – which in many situations would be an impossible standard to meet. As noted in the commentary to Principle 22, “Operational-level grievance mechanisms for those potentially impacted by the business enterprise’s activities can be one effective means of enabling remediation . . .” (emphasis added). Commentary to Principle 29 further clarifies that operational-level grievance mechanisms “need not require that a complaint or grievance amount to an alleged human rights abuse before it can be raised, but specifically aim to identify any legitimate concerns of those who may be adversely impacted.”

As described in full in the Citizen Lab letter, peer-reviewed research has established the targeting of numerous peaceful civil society actors, including journalists, activists, lawyers, and others, with Pegasus spyware. This targeting, whether or not infection occurs, prima facie infringes on these individuals’ rights to privacy and freedom of opinion and expression. Such targeting should indicate to NSO Group that some of its clients are not deploying NSO products in compliance with international human rights law, or in a manner that is “proportionate and targeted, operating within robust and clear legal frameworks,” as Novalpina Capital’s letter states. NSO Group’s continued service to clients that have engaged in such targeting is concerning, especially in the absence of evidence that human rights due diligence has been undertaken or evidence to show that any human rights impacts linked to its products have been addressed.

Novalpina Capital’s letter also seems to raise the standard for action on human rights impacts to a very high threshold. For example, the company states that it will act on “instance[s] in which it were proven that human rights abuse was facilitated by the misuse of NSO’s technology.” Such an approach would set an extremely high bar, requiring proof that a Pegasus infection took place and was utilized by a government to engage in separate and distinct human rights violations, even though the targeting of individuals with this software would itself constitute a violation under international human rights law.

Posted: January 1, 1970, 12:00 am

© 2019 Human Rights Watch

The International Monetary Fund (IMF) monitors the economic health of 189 member countries, and regularly publishes an analysis of each country’s economy, called an Article IV report, highlighting key economic risks. The IMF has long recognized systemic corruption as a serious economic threat, and in 1997 it committed to promoting good governance and tackling corruption as an essential part of its mission. New data analysis of Article IV reports over the past 15 years sheds light on how well the IMF has lived up to this promise.

Two scholars from Central European University, David Mihalyi, who also works at Natural Resource Governance Institute, and Akos Mate, created a dataset of over 2,500 Article IV consultation and program review documents published between 2004 and 2017. They used the dataset as a rough tool to gauge the priorities and thinking of IMF country teams on topics such as resource governance and public finance. Human Rights Watch, based on data provided by the authors, analyzed the trove of documents to get a sense of how frequently they mention the word “corruption.” The results were mixed.

The number of times the Fund mentioned corruption plummeted after the Great Recession hit the global economy in 2008. It continued to pay relatively less attention to corruption for the next eight years. But in 2016 that changed. The number of times the Fund explicitly addressed corruption in its reporting nearly doubled to 850 references compared to 458 the previous year. In 2016, the IMF began an internal review on how it addresses corruption. That review led to a new framework for improving the Fund’s fight against corruption, launched in 2018.

Because the IMF frequently uses euphemisms to address corruption, the documents were also analyzed for references to “waste,” “lack of oversight,” and “transparency.” As the graphic indicates, the findings were similar, if somewhat less dramatic.

As the Fund acknowledged, its treatment of corruption is highly uneven across countries. Human Rights Watch’s analysis highlight reviews of Fund programs in specific countries have intensive discussions of corruption absent from most country reports. For example, in the seven years following Afghanistan’s request for financial assistance in 2011, reports on the country mentioned “corruption” 323 times, a ten-fold increase over the previous seven years. But this also appears to be changing: In a hopeful sign, the number of countries about which the Fund reports mentioned corruption more than three times rose from a low of ten in 2009 to 46 in 2017.    

These are only words and not evidence of more substantive anti-corruption policies. Nevertheless, naming the problem and transparency are keys to fighting corruption. The sharp increase in calling out corruption is a hopeful sign that the IMF is taking its renewed commitment to fighting corruption seriously. But in the years ahead, the real test will be how it integrates anti-corruption measures into its loans and other assistance programs.

Author: Human Rights Watch
Posted: January 1, 1970, 12:00 am

House Financial Services Committee chairwoman Maxine Waters listens during a hearing with leaders of major banks on Wednesday, April 10, 2019 in Washington, DC.

© 2019 AP Images

(Washington, DC) – The United States Congress should pass a proposed law that would provide law enforcement a crucial tool for stemming corruption and advancing human rights, 10 human rights organizations said in a letter to members of Congress today. Although it has yet to be formally introduced, a draft of the Corporate Transparency Act of 2019 was the subject of a House Financial Services Committee hearing on March 13 and will be discussed at a congressional briefing on Friday. The bill would require American companies to disclose information about the actual people who own or control them, making it harder for corrupt foreign officials to register businesses anonymously, to hide ill-gotten gains, and to escape legal accountability.

The organizations are Amnesty International USA, Freedom House, Global Witness, Human Rights First, Human Rights Watch, International Corporate Accountability Roundtable, International Labor Rights Forum, EarthRights International, EG Justice, and Enough Project.

Corruption poses a serious challenge to human rights in many countries. The loss of resources undermines a government’s ability to invest in health, education, housing, and other basic rights. Corrupt officials frequently target transparency advocates, journalists, and others who they fear will expose their crimes and they abuse the criminal justice system to punish their critics and protect themselves from prosecution.

“Allowing businesses to move millions of dollars without anyone knowing who owns them is a gift to corrupt foreign officials looking to launder dirty money,” said Sarah Saadoun, business researcher at Human Rights Watch. “The US Congress should pass this bill to drive money launderers out of the shadows and help restore the money they stole to the public to whom it belongs.”

Posted: January 1, 1970, 12:00 am
Video

Equatorial Guinea: UN Review Should Highlight Abuses

Governments should use an upcoming United Nations review of Equatorial Guinea’s rights record to question the country’s brutal repression of human rights defenders, the political opposition, and others who criticize government abuses and rampant corruption.

 
(Geneva) – Governments should use an upcoming United Nations review of Equatorial Guinea’s rights record to question the country’s brutal repression of human rights defenders, the political opposition, and others who criticize government abuses and rampant corruption, Human Rights Watch said today in releasing a video about the human rights conditions in the country.

Equatorial Guinea will undergo its peer review before the UN Human Rights Council, known as the Universal Periodic Review (UPR), on May 13, 2019. The UPR allows the governments that sit on the council to scrutinize each country’s human rights record every four years and make recommendations for improvement.

“Governments should seize the opportunity of the peer review to carefully scrutinize the human rights record of Equatorial Guinea, currently a member of the UN Security Council, including its track record of intimidating, imprisoning, and torturing critics of the government,” said Sarah Saadoun, Business and Human Rights researcher at Human Rights Watch. “An artist, a teacher, a human rights defender – these are some examples of people the government has targeted.”

Human Rights Watch has documented numerous cases of retaliation against activists and political opposition members in Equatorial Guinea, including harassment, arbitrary detention, ill treatment, and torture. These include dozens of cases in which detainees were denied basic due process rights, such as access to legal representation and being charged with a crime. The government has not investigated or held anyone accountable for these abuses.

Governments should express serious concern about these abuses and press the Equatorial Guinean government to:

  • Respect citizens’ freedom of expression and political opinion;
  • Ensure the independence of the judiciary and respect due process rights of anyone in custody;
  • Produce a comprehensive list of political prisoners and provide information on the whereabouts of all prisoners;
  • Permit independent monitors, such as the UN special rapporteur on freedom of expression and UN Working Group on Arbitrary Detention, to visit the country and provide them with access to prisons and detention centers; and
  • Use its available resources to ensure proper funding for education, health, water, and sanitation.

The suppression of criticism and dissent has helped President Teodoro Obiang to remain in power for 40 years, making him the longest serving president in the world. Obiang, his family, and other members of the ruling elite have plundered the nation’s oil wealth, while investing little in improving access to health care and primary education for the vast majority of Equatorial Guineans.

In 2016, Obiang appointed his son, Teodorin Nguema Obiang, vice president, putting him next in line for the presidency should his 80-year-old father resign, become incapacitated, or die. In October 2017, a French court convicted the son in absentia of stealing more than $120 million from the public treasury to finance a lavish lifestyle in Paris. Swiss prosecutors reached a deal with Equatorial Guinea to close a money laundering investigation into Nguema Obiang in February 2019, and the US Department of Justice settled a similar case in 2014. In a rare positive step, Equatorial Guinea, in May, ratified the United Nations Convention Against Corruption, a move the International Monetary Fund required as a pre-condition for a loan.

“The government’s brutal campaign to silence dissenting voices not only destroys the lives of those brave enough to defy it but underpins a government that has robbed many Equatoguineans of the country’s oil wealth,” Saadoun said. “Money that should have been invested in fulfilling the rights of the country’s citizens goes to yachts, planes, and mansions.”

For a sample of cases of people who have suffered abuse by the government, please see below.

Human Rights Watch, EG Justice, and other human rights organizations have documented numerous cases of Equatorial Guinean authorities’ repression of human rights defenders and the political opposition over the past decade based on interviews with victims and lawyers, legal documents, and photos. Several cases from September 2017 to March 2019 are described below. In some of these cases, authorities harassed, arrested, or mistreated people merely for criticizing the government in violation of their freedom of expression. In other cases, the arrests may have been lawful, but detainees experienced serious due process violations and ill-treatment.

Arbitrary Detention, Torture of Political Opponent

Joaquin Elo Ayeto founded Somos+, an organization to mobilize and engage young people in demanding greater accountability of the Equatoguinean government. He is a member of the political opposition party Convergencia Para la Democracia Social. On February 25, 2019, police, led by the presidential security director, arrested Elo Ayeto, apparently because, in a class, he had criticized a government project to build a church rather than invest in health and education. He had been detained twice before for apparently politically motivated reasons. Elo Ayeto told his lawyers that during the interrogation, police telephoned his classmate, who is the presidential security director’s niece, and that she repeated the comments he had made on speaker phone. Following the call, he said, police began questioning him about an alleged coup plot that he had no knowledge of.

On the second day, the police tied his hands and feet, hung him from the ceiling, and lashed his buttocks and legs, Elo Ayeto told his lawyers. Human Rights Watch viewed photographs of Elo Ayeto taken in the days after his arrest, which show markings on his body consistent with this account. On February 29, Elo Ayeto was taken before a judge, who ordered him held in preventative detention, which in Equatorial Guinea allows the government to hold someone indefinitely without charge or evidence. Elo was then transferred to Black Beach prison, where he remains.

Retaliation, Arbitrary Detention, Physical Attacks Against Human Rights Defender

Alfredo Okenve, vice president of the Center for Development Studies and Initiatives (CEID), an organization that promotes good governance and human rights in Equatorial Guinea, has for several years faced repeated reprisals for his work. From 2007 to 2017, he represented civil society in a multi-stakeholder group formed as part of the government’s bid to join the Extractives Industry Transparency Initiative, a global program that advances transparency in resource-rich countries. In March 2019, authorities prevented Okenve from leaving the country and briefly placed him under house arrest.

Six months earlier, four men, who appear to have been undercover security officials, dragged him from his car at gunpoint, drove him to a remote location, and beat him severely. In 2017, police held Okenve, along with the president of CEID, in a police station for two weeks until he agreed to pay a fine of more than US$3,000. Okenve has been unable to find employment since he was removed from two posts at the National University after criticizing the government’s transparency record at a May 2010 event in Washington, DC. A private company that agreed to hire Okenve withdrew the job offer at that time, apparently due to government pressure.

Arbitrary Detention of Artist

A self-portrait by artist Ramón Esono Ebalé, sitting in the cell where he spent six months in prison.

© 2019 Ramón Nsé Esono Ebalé

Ramón Esono Ebalé, an artist who lives outside the country, was arrested in Malabo on September 16, 2017, while in the country to request a new passport. Police interrogated him about his drawings, which were critical of the government.

Three months later, as he still awaited his passport, the authorities charged him with counterfeiting $1,800 in local currency. At Esono Ebalé’s trial, the police officer who had claimed to have found the counterfeit money in Esono Ebalé’s car admitted he had acted on orders of his superiors. The prosecution then withdrew the charges and he was released on March 7, 2018, after spending nearly six months in prison. The case drew widespread attention and condemnation from dozens of human rights organizations, hundreds of artists, and high-profile figures from around the world.

Arbitrary Detention of Teachers

Police arrested Julián Abaga, a teacher, on December 12, 2017, soon after an audio message he sent to a friend living abroad denouncing corruption in Equatorial Guinea was uploaded to the internet, said a news release from a political opposition party. A lawyer who met with Abaga said he was accused of “insulting the president.” He was never brought to trial, and was released on July 4, 2018 in what the government called a “gesture of goodwill,” following an event Obiang initiated that purported to bring the government into dialogue with political opposition groups.

Arbitrary Detention, Torture of Political Opposition Members

In December 2017, police arrested 147 members of Citizens for Innovation (CI), the only opposition political party with a seat in parliament. The sweep followed a confrontation in the city of Aconibe between police and CI supporters attending a rally for which it held a permit. During the confrontation, news reports said, CI members harmed three police officers, but the authorities appear to have used the incident to crack down on CI. 

The police arrested dozens of CI members on December 28 at CI’s headquarters. Elvira Beba Cité, who was elected as a CI City Council member the previous month, was among them. She was not involved with the protest and was not there. While in prison, she and the others were frequently beaten and denied access to an attorney, she told Human Rights Watch.

On February 23, 2018 a court ordered CI dissolved and sentenced 21 of the detainees to 30 years in prison for “sedition” and other crimes. The court released the others, including Beba Cité. Lawyers representing some of the detainees allege that many had been tortured while they were in prison, including two who died. On October 22, Obiang pardoned those who had been convicted, along with 48 other prisoners, but without citing a reason.

 
Posted: January 1, 1970, 12:00 am

A picture taken on February 14, 2012 on the Avenue Foch in Paris shows a truck at the entrance of Paris residence of the son of Equatorial Guinea's President Teodoro Obiang, being searched by French police as part of a corruption probe.

© 2012 Eric Feferberg/AFP/Getty Images

A Paris criminal court recently convicted Equatorial Guinea’s vice president in absentia of laundering more than US$120 million of his country’s assets in France, and seized his ill-gotten gains. The case, initiated by two French organizations and litigated for a decade, is a first for France and paves the way for holding officials accountable for stealing from the public they are meant to serve.

But justice will remain half-served unless the French government returns the money to the people from whom it was stolen. Currently, French law does not guarantee this, but the French Senate is this week debating a bill that would require any assets France seizes from foreign officials gained through abuse of office to be repatriated.

Systemic corruption, notably by the vice president, Teodorin Nguema Obiang, who is also the president’s son, has frustrated hopes that oil riches would transform the lives of ordinary citizens. Despite having the highest per capita national income in Africa, Equatorial Guinea has one of the world’s worst vaccination and primary school enrollment rates, reflecting chronic underinvestment in health and education. Indeed, France seized more money from Nguema than his government spent on health in 2011, the most recent year for which data is available.

The United States, Switzerland, and other countries have already returned hundreds of millions of dollars under similar laws to the one France is considering. Admittedly, risk is high that the money will be lost again to corruption if returned to the government without proper controls. But, done right, it is possible to successfully transform the luxury assets of kleptocrats into vital social programs. For example a joint US-Swiss program, established in 2008, returned US$115 million to poor people in Kazakhstan through direct cash transfers to families with pre-schoolers and via university scholarships.

If France simply keeps holding the seized cash in its treasury, it risks bolstering Equatorial Guinea’s claim that the trial was a “neo-colonial” effort to extract African riches. The organizations that brought this case, Transparency International-France and Sherpa, have initiated similar cases against senior officials from two other African countries, making it essential to dispel these accusations.

To do so, France should pass the law that repatriates embezzled public funds back to the people they were stolen from.

Author: Human Rights Watch
Posted: January 1, 1970, 12:00 am