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WRAP CEO: The Rise of Fast Fashion Pressures Factories into Non-Compliance

After the Tazreen Fashions fire and Rana Plaza collapse, compliance rocketed to the top of the agenda for firms working in Bangladesh, but that may not necessarily save lives, says Avedis Seferian, President and CEO of WRAP, a compliance certification company. Current industry trends like fast fashion exert considerable pressure on factories to violate compliance regulations.

According to Seferian, real change comes from incentives, not media hype. To bring safer conditions to Bangladesh, the RMG sector will have to make it pay. And that may mean modifying the fast fashion paradigm that drives much of that country’s growth.

“Fast Fashion has gotten too fast. The companies don’t understand – when they change a pattern at the last minute, or demand a quick turn order, they’re basically requiring that the supplier force illegal overtime, and they’re eating up the money that could pay for safer conditions,” says Seferian.

At H&M, this conflict is front and center. The firm has vowed to increase its Bangladesh sourcing by almost 50 percent (a pledge it has failed to renew since the twin disasters). At the same time, it is committed to providing safe working conditions in the country.

H&M’s strategy involves empowering working committees and making safety a part of every contract. They also have boots on the ground, working to inspect and certify factories. But the basic cause of the unsafe conditions hasn’t changed.

In fact, says Seferian, they may be getting worse. Increasing fast fashion production in the country means rewarding suppliers who can deliver goods quickly, at very low cost.

The problem is compounded by government ineptitude. In Bangladesh, factories don’t just need to mitigate risks. They also need to be prepared to handle disasters by themselves, which is far more costly.

“You have to prepare to handle big disasters in the factory, because the government may not have the infrastructure. The big picture makes it hard to rely on external aid,” says Seferian.

If the government does have the necessary training and equipment to fight a fire or search a doomed building, the rescue workers may spend hours sitting in traffic on Bangladesh’s clogged roads, and arrive at the disaster only to find that the water is turned off.

Bangladesh is the number two exporter to the United States because their cheap labor prices facilitate low-cost production, and their government often turns a blind eye to safety conditions. This is good for foreign firms, but only until a crisis hits. It also encourages sloppy behavior.

“Sourcing practices have a big impact on compliance. Right now, the model separates sourcing and compliance. They’re silted. There are some firms that will find factories they want to work in, preorder, and then send compliance in after the fact. By that point, it’s too late to change anything,” says Seferian.

The problem is not just limited to Bangladesh. Pakistan, Vietnam and other low-cost sourcing destinations have similar problems. Bangladesh is in the news because of the scope of its disasters, and the involvement of leading western brands.

Business in those countries is transactional – a pattern that fast fashion only makes worse. In a transactional business, the focus is on making short-term profits, not ensuring long-term operations.

“Compliance boils down to sustainability,” says Seferian. “If your factory burns down, you’re not in business anymore!”

Seferian struck a pragmatic tone, warning that while the attention devoted to compliance now has the potential to spark progress, in itself it will not suffice. “Bangladesh is very important right now, so the importance of fire and health and safety is very high. When WRAP got going, there was a lot of attention paid to child labor, but child labor didn’t go away,” he said.

This way of thinking is incentivized by the ordering structure. But compliance can lead to higher profits. Studies show that turnover in the garment industry in Bangladesh is around 30 percent. If it can be reduced to 8 to 12 percent, productivity increases dramatically. Improving conditions to make safer environments for workers can cut turnover, allowing owners to reap productivity increases.

Moving beyond the fast fashion mindset in Southeast Asia will require a dramatic reconsideration of value propositions, as well as the evolution of in-country practices by local factory owners. New safety agreements will demand higher standards in the developing world, rewarding owners who are able to wring profit out of higher productivity and better environments. For others, the requirements will be a burden, pushing further subcontracting under worse and worse conditions and enforcing the shadowy business culture in Bangladesh.