Report: Indirect Sourcing in Bangladesh Root Cause of Factory Safety Problems: NYU Center for Business and Human Rights research focuses on business relationships

For Immediate Release: April 21, 2014 
Contact: Meredith Mackenzie, West End Strategy Team; Office: (202) 776-7600; cell: 202-427-2007

NEW YORK, NY – Indirect sourcing, the opaque practice of subcontracting, is a root cause of safety risks and poor working conditions in Bangladesh. Released one year after the collapse of Rana Plaza became most deadly industrial accident in modern manufacturing, the New York University Stern Center for Business and Human Rights’ report “Business as usual is not an option: Supply chains and sourcing after Rana Plaza” (PDF) examines a range of measures undertaken in the last year, none of which have yet addressed the fundamental problems facing the garment industry.

Though indirect sourcing has helped invigorate the garment industry and Bangladesh’s economy, global brands doing business in Bangladesh need to assess the overall universe of factories and facilities producing their products and address the most urgent risks. The Center will convene a closed-door summit in Dhaka next week from April 27 – 29 and will invite global brands, local manufacturers, government officials, civil society groups, unions, and international donors to consider the report’s findings and discuss an action agenda for addressing the underlying problems in factory safety and workers’ rights.

“Indirect sourcing has become an essential feature of the garment sector in Bangladesh as a means of increasing margins and boosting production while keeping costs low,” said Sarah Labowitz, co-director of the center and the co-author of the report. “In the absence of regulation by the government of Bangladesh, the prevalence of indirect sourcing has resulted in a supply chain driven by the pursuit of lowest nominal costs. That means that factories receiving subcontracts are operating on razor-thin margins that leave concerns about safety and workers’ rights perpetually unaddressed.”

Additionally, the center found that the two major remedial plans launched in the last year, the Accord and the Alliance, fail to address the risks caused by indirect sourcing. The two initiatives focus on monitoring less than 2,000 factories, while the total number of factories and facilities producing for the export garment sector is likely to be between 5,000 – 6,000. The worst factory conditions are largely in the factories and facilities that fall outside the scope of these initiatives.

“People across the sector recognize that Bangladesh’s sustained development depends on the garment sector, including through the continued investment of global buyers,” said Michael Posner, co-director of the center and the former assistant secretary of State for democracy, human rights and labor. “We share the goal expressed by many people of ensuring that ‘Made in Bangladesh’ is a sign of pride for workers, business and consumers. That’s why global retailers and their first-tier manufacturing partners need to recalibrate their business relationships to prioritize transparency and longer-term sourcing commitments.”

NYU Stern’s recommendations call for companies across the sector – global buyers and national-level suppliers – to join forces to create a single, unified fund for building repairs, safety upgrades and remediation.

The report presents a forward-looking agenda, starting with a collective effort to determine how many factories – big and small, registered and unregistered – participate in garment manufacturing for the export market. Together with the government of Bangladesh, global brands, the trade associations, and leading Bangladeshi exporters should compile and publish a single, comprehensive list of all factories and facilities, which should be updated periodically.

“Bringing second and third tier factories into the open will make workers safer and help prevent future deadly industrial accidents,” said Labowitz. “Enhancing oversight of subcontracting facilities is a long-term project, but the first step is to acknowledge the true scope of the problem.”

The report calls on the international community – foreign governments, the World Bank and other intergovernmental organizations – to convene a major donors conference on factory safety and critical infrastructure in Bangladesh. Absent the infusion of such funds, the report warns that, “we are destined to see recurring tragedies in Bangladesh.”

The report was written by Sarah Labowitz and Dorothée Baumann-Pauly, the center’s research director. It is based on a yearlong effort by the NYU Stern Center for Business and Human Rights. Labowitz conducted two fact-finding missions to Dhaka in July 2013 and February 2014. In researching the report, the center interviewed more than 100 people about business practices in the supply chain. The center also convened a major meeting in New York in September 2013 that brought together key players from across the garment sector, including Bangladeshi manufacturers and global brands.

For more on the report please click here. (PDF)


The NYU Stern Center for Business and Human Rights is focused on what companies are doing and should be doing to ensure respect for human rights in their core business operations. The Center is working to prepare future business leaders with the tools they will need to address complex human rights challenges in a business environment. To advance this mission, the Center is pursuing three primary activities: 1) teaching and research, 2) providing a safe, solutions-oriented convening space for companies and other stakeholders and 3) public education and advocacy.

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