The Rana Plaza Disaster 10 years on: Challenges and Opportunities

Rana Plaza was a building that contained multiple factories located on the outskirts of Dhaka in Bangladesh. On the 23rd April 2013, attention was drawn to cracks in the building, causing evacuation, closure and a warning to avoid the building. Workers were subsequently sent back into the building the next day, and when the building collapsed on the morning of the 24th April, there were tragically more than 3,000 people inside[2]. The collapse marked one of the largest industrial accidents in history and exposed the sector’s very serious challenges.

The industry challenges had been previously acknowledged, and investors had been engaging on issues of labour rights, decent work and living wages for some time. We had been one of 80 investors engaged in Oxfam’s ground-breaking Better Returns in a Better World project and had hosted a group of investors and labour rights experts at a Decent Work in Global Supply Chains roundtable in 2009. The project and roundtables debated equally ground-breaking sell-side research that was beginning to integrate the labour rights and safety issues into fundamental investment analysis to assess the sustainability of business models. The integration of labour issues into fundamental investment analysis has taken a significant step forward over the last decade. It remains a key interest for us now at GIB AM.

The scale of the tragedy in 2013 proved to be a catalyst to move conversations from corporate roundtables to high street stores and from discussions to people taking action. It sparked a number of movements that would work to educate and inform consumers, and it is clear to us that they accelerated a shift in the public’s perception of fast fashion. Notable amongst them was the launch of Fashion Revolution[3] in 2013 and the release of the True Cost film[4] in 2015, which focused on encouraging consumers, companies, and investors to ask more questions and drive more transparency.

Two significant agreements were established on the ground: the Accord[5] and the Alliance. These initiatives brought together international brands, labour unions, and NGOs to collaborate on improving factory conditions and ensuring the safety of workers. As a result, over the past 10 years, more than 1,600 factories have been inspected, and substantial improvements have been made in fire and building safety. These include the installation of fire doors, sprinkler systems, and proper electrical wiring, as well as strengthening the structural integrity of buildings.

One member of our initial trip returned this year to Bangladesh and explained the significant impact that the Bangladesh Accord has had on factory safety through building integrity, as well as fire, electrical and safety considerations. They believe it has reduced the risk of additional large-scale factory accidents similar to what happened at Rana Plaza. We note the role of investor coalitions such as the Interfaith Centre on Corporate Responsibility (ICCR)[6] in engaging to drive change across the sector, facilitating dialogue between investors, brands, and stakeholders and targeting pressure to sign the Alliance or Accord. We believe that these investor groups played a key role in engaging with apparel brands to sign the Accord or join the Alliance against frequent initial resistance. The positive impact can therefore be attributed in part to their actions.

A key concern in 2013 was that these issues extended beyond Bangladesh and that responses should be global. We note the many global efforts in the last decade and point in particular to the introduction of the Modern Slavery Act in the UK, the creation of the Higg index and the Environmental Profit & Loss account as highlights for us.

The Rana Plaza tragedy exposed three key challenges; the difficulty of measuring decent work and a living wage, the reduced transparency and safety associated with outsourcing, and the risks created by short lead times on orders. Unfortunately, we believe that these issues remain largely unresolved a decade later.

There are indications that despite progress, access to decent work and living wages may remain a challenge in Bangladesh, highlighted by the minimum wage remaining unchanged since 2018[7]. Outsourcing also remains a concern, as while the inspections covered a large number of factories, it was always hard to assess work that was outsourced beyond their walls. We note that the Bangladesh Garment Manufacturers and Exporters Association (BGMEA)[8] has introduced a centralised database to track and monitor subcontracting in an effort to reduce unauthorised outsourcing. However, one of the people we engaged with expressed that subcontracting work to smaller unregulated factories over the years remains common practice.

The Fashion Transparency Index 2022 concluded again that progress on transparency across the 250 companies they measured remains too slow, with an average score of 24%, only a 1% improvement on 2021. We commend those three companies who scored the highest score of 78, and welcome the inclusion of brands that we have invested in and engaged with in previous roles above 50%, but also note that some we have engaged with remain below that level[9].

Short lead times also appear to be a persistent issue as the demands of fast fashion maintain the pressure to meet production deadlines. Another contact noted that while many of the brands we engaged with have improved their practices, new brands have arisen in the last 10 years that have not been subject to the same pressures to deliver decent work and have proved successful and profitable in the short term.

The global response following the Rana Plaza disaster was underpinned by collaboration, which we believe illustrates the power of partnership. We worked as a part of many collaborative efforts involving companies, civil society and investors, all focused on improving conditions in these supply chains to ensure future prevention and to improve working practices over time.

At GIB AM, we have created the Sustainable World strategies to apply all of the experiences and lessons of decades of investment in and engagement with companies on these issues to deliver financial returns for our clients. We believe that companies that positively impact these issues can have stronger, more robust business models. Companies providing a living wage and decent work should be better placed to avert tragedy in our view with more profitable, resilient and sustainable business models over time.

After what is always a difficult anniversary, we reflect on the efforts of civil society groups, factory owners, companies and investors over the last ten years to prevent further tragedies and applaud the progress made. Simultaneously, in our view, more remains to be done. We believe this provides an opportunity for more sustainable companies, their employees and those investors seeking to create financial performance through investing in companies delivering positive change on these critical issues.