1Precarious Work in the H&M Global Value Chain - Asia Floor Wage
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Precarious Work in the 1 H&M Global Value Chain
2 3
Asia Floor Wage Alliance (AFWA) was
officially formed in 2006 and includes up
to 71 organizations, which constitute a
network from 17 countries across Asia,
Europa and North America to represent
garment industry trade unions, NGOs,
consumer groups and research institutes.
The Center for Alliance of Labor & Human
Rights (CENTRAL) is a local Cambodian
NGO. The organization empowers
Cambodian working people to demand
transparent and accountable governance
for labor and human rights through legal
aid and other appropriate means.
SLD is a Delhi-based labour rights
organisation, that believes in equitable
development through social and
economic well-being of labour, migrants,
and women workers; and through
cultural renewal among disenfranchised
people. SLD is a national organisation that
originated with a focus on the National
Capital Region and works with partners
in Uttar Pradesh, Bihar, Jharkhand, and
Kerala.
The National Centre for Development
Cooperation, or CNCD-11.11.11, includes
nearly 80 development NGOs, trade
unions and associations engaged in
continuing education for international
solidarity in the French Community and
Community of Belgium.
The United Workers Congress (UWC) is
a strategic alliance of workers that are
either by law or by practice excluded from
the right to organize in the United States.
This national network represents a base
of workers, and also regional networks
and individual organizations in industries
where there is no national network.
EXECUTIVE SUMMARY 4 5
On Thursday, December 10, 2015, 6000 garment H&M operates in 61 markets with 3,900 stores;
workers in Phnom Penh, Kampong Speu and works with 900 suppliers representing 1,900
Kampong Som organized to protest employment factories; and employs more than 116,000
practices in global value chains headed by H&M employees across their global production
and other key international retailers. Supported network. (ILO 2014; Donaldson 2016a). H&M
by the Coalition of Cambodian Apparel Workers saw sales rise globally in 2015 and plans to open
Democratic Union (CCAWDU), Cambodian workers 425 new stores in 2016 (Donaldson 2016b).
sought fair wages and working conditions. In Brands like H&M wield the potential to transform
India, garment workers from six factories that working conditions through their supply chains.
produce for brands including H&M and Gap rallied Recognizing their responsibility to uphold human
in solidarity. rights at work, H&M has set themselves apart
from other brands by committing to ensure fair
On May 4, 2016, these actions were joined by living wages, safe workplaces and accountability
solidarity actions at H&M stores in 11 cities across for rights violations within their supply chains.
the world. From diverse sites across the garment These commitments stake a powerful corrective
global production network (GPN), workers and to high pressure sourcing models within the
their allies called upon brands, including H&M, to garment global production network that create
ensure their rights to earn a living wage, unionize overwhelming incentives for factories to reduce
without dismissal and resist labour law changes costs and speed production by ignoring labour
that undermine freedom of association, maintain standards. H&M store locations worldwide as of October 2015. Red indicates current countries and pink indicates
poverty level minimum wages and facilitate planned expansion.
flexible employment relations (Finster 2015). According to a 2013 statement by the then by Barthateslisa licensed under CC BY 2.0.
global head of sustainability at H&M, Helena
Helmersson, these measures will not impact the ground is never going to result in real change Shedding light on gaps in implementation of
The growth of global consumer costs: “Wages are only one part of for H&M production workers. Instead, it serves H&M commitments, violations of international
sourcing costs,” she explained. “We don’t think as a public relations facade to cover up systemic labour standards and challenges H&M may face
production networks (GPNs) there will be any impact on prices” (Passariello abuse.” in upholding commitments to decent work, this
within the garment industry 2013). report contributes new research collected through
In recent years, the status of H&M’s commitments interviews with 251 workers in Cambodia and
is an important source However, while projecting a public commitment to human rights at work has been the subject of India engaged in H&M supply chains. These recent
of employment in many to sustainability, results of H&M initiatives are numerous studies by labour unions, human rights findings, collected between August and October
countries. Jobs for workers yet to be seen—causing workers to question
H&M’s commitment to decent work. As explained
organizations and their allies—ranging from the
Clean Clothes Campaign to Human Rights Watch.
2015, are situated in context of both previous
studies on H&M supply chains in Cambodia
at the base of the garment by Athit Kong, Vice President of the Coalition of H&M has actively engaged critiques, providing and India and the broader context of the global
global value chain, however, Cambodian Apparel Workers Democratic Union detailed responses to documentation of rights production network.
(C.CADWU): abuses in their supply chains. In the lead up to
typically entail precarious the 105th Session of the International Labour This report contributes new
employment relationships, “H&M’s PR rings hollow to workers who are Conference, focused for the first time on Decent
research collected through
struggling everyday to feed their families. A work in global supply chains, this report revisits
low wages, excessive working sustainability model that is put forth and wholly the status of H&M’s commitments to decent work interviews with 251 workers
hours and poor working controlled by H&M but is not founded on genuine through the lens of rights at work as they are in Cambodia in India engaged
respect for organized workers and trade unions on protected under International Labour Organization
conditions (Ghosh 2015). (ILO) conventions and other instruments. in H&M supply chains.
6 7
Section one provides a brief overview of global
production networks in general and the garment
Section three provides a brief overview of the
market share of Asian garment value chains and Recommendations enforcement mechanisms and encourage national
governments to do the same.
global production network in particular. It
outlines key shifts in employment relationships
more focused country profiles on the Cambodian
and Indian garment industries. These sections aim for the ILO at the The ILO Tripartite declaration of principles
as production processes evolve to include several
companies across multiple countries. This section
to contextualize empirical findings on working
conditions presented in the final section of the
International Labour concerning multinational enterprises and social
policy (MNE Declaration), 2006 provides a
also traces the concentration and distribution of
control over production processes across various
report. This context is particularly significant since
H&M sources roughly 80% of its products from
Conference, 2016 good starting point. However, within the MNE
Declaration, MNE refers only to subsidiaries or
actors in the garment global production network. Asia (Donaldson 2016a). franchises. Accordingly, GVCs and GPNs in their
As detailed in this report on the garment global
current form are not covered by this Declaration.
production network (GPN), due to the scale of
Section two reviews H&M’s public commitments Section four discusses, in detail, the intensive The need of the hour is for the ILO to clarify and
global trade accounted for by GVCs, there is an
to promoting decent work in their supply chains, labour exploitation and abuse faced by workers update its standards and mechanisms to protect
urgent need for global mechanisms to monitor
including: the H&M Roadmap to a Fair Living in H&M supply chains in Cambodia and India. workers employed by transnational corporations
and regulate GVCs and GPNs. The ILO—the only
Wage; Model Factory Programme; production Recent empirical findings are supplemented with (TNCs) across vast GPNs.
global tripartite institution—has a unique role to
unit disclosure; partnerships with the ILO; and the evidence of rights violations drawn from existing
play in setting standards for all of the actors that
Accord on Fire and Building Safety in Bangladesh. studies. In this section the human rights violations The following recommendations emerge from
impact fundamental principles and rights at work.
Where possible, it includes discussions and and consequences of precarious work in the H&M our experience promoting rights at work in global
research on the efficacy of these initiatives to
date.
supply chain are articulated thematically in order
to surface the pattern of rights violations across
The ILO—the only global value chains.
Cambodia and India. tripartite institution—has a 1. Given the well-documented and rampant
exploitation of workers and resources by MNEs
H&M protest on global day of action, Times Square, New York, 2016 unique role to play in setting operating through GVCs, and noting the limits on
by Sara Ziff licensed under CC by 2.0
standards for all of the actors regulation under national legal regimes, the ILO
should move towards a binding legal convention
that impact fundamental regulating GVCs.
principles and rights at work. 1.1. Standards under this convention must
be at least as effective and comprehensive
TNCs and their suppliers have a duty to as the UN Guiding Principle on Business and
obey national laws and respect international Human Rights and existing OECD mechanisms,
standards—especially those pertaining to including the 2011 OECD Guidelines for
realization of the fundamental principles Multinational Enterprises.
and rights at work. A number of ILO core 1.2. The Convention should include the
labor standards, such as the Forced Labour following components, among others:
Convention, 1930 (No. 29), Protocol to the Forced 1.2.1. Imposition of liability and sustainable
Labour Convention, 2014 and accompanying contracting, capitalization and/or other
Recommendation, already protect workers requirements on lead firms to ensure
in value chains. However, as this report accountability throughout the GVC.
details, changes in the modern workplace and 1.2.2. Establishment of a Global Labour
globalization of value chains has opened up new Inspectorate with monitoring and
gaps in the protection of fundamental principles enforcement powers.
and rights at work. In addition to clarifying the 1.2.3. Publicly accessible transparency and
application of existing standards in global value traceability provisions.
chains, the ILO should set new standards and 1.2.4. Specific provisions that address the
8 9 ACKNOWLEDGMENTS
vulnerability of migrant workers on GVCs. research should aim to satisfy basic needs This report is one in of a series of reports, This report was edited by Anannya Bhattacharjee.
1.2.5. Specific provisions that address the of workers and their families. entitled Workers Voices from the Global Supply Recommendations for the ILO at the International
vulnerability of women workers on GVCs. 4.1.3. Access to fundamental rights to food, Chain: A Report to the ILO 2016. Investigation Labour Conference, 2016 were formulated by a
1.2.6. Limits on the use of temporary, housing, and education for all categories of of production conditions in H&M factories in group of organizations, including the international
outsourced, self-employed, or other forms value chain workers and their families. Cambodia and India was coordinated by the Asia Floor Wage Alliance, Jobs with Justice (USA),
of contract labor that limit employer 4.2. Research into the range of global actors Society for Labour and Development (SLD). National Guestworkers Alliance (USA), and Society
liability for worker protections. that may have leverage over GVCs including for Labour and Development (India).
investors, hedge funds, pension funds and GVC Desk research and writing was completed by
2. Pursue a Recommendation on human rights networks that define industry standards such as Shikha Silliman Bhattacharjee, JD. Data analysis We extend gratitude to the workers who shared
due diligence that takes into account and builds Free on Board (FOB) prices. was conducted by Ananya Basu and Vismay their time, experience and materials for the
upon existing due diligence provisions that 4.3. Research into the technical advice needed Basu. Primary data collection was undertaken purpose of this study.
are evolving under the United Nations Guiding by OECD government participants taking a by Joel Preston, Phnom Penh based CENTRAL, in
Principles on Business and Human Rights and multi-stakeholder approach to address risks of Cambodia; and Vismay Basu, Delhi-NCR based
the 2011 OECD Guidelines for Multinational adverse impacts associated with products. Society for Labour and Development (SLD) in
Enterprises. 4.4. Research into mechanisms deployed India.
3. Take the following complementary measures by authoritative actors within GVCs that
to protect workers employed in global value contribute to violations of fundamental
chains:
3.1. Recognize the right to living wage as a
principles and rights at work, including but not
limited to attacks on freedom of association, FIGURES
human right and establish living wage criteria collective bargaining, forced overtime, wage
and mechanisms. theft and forced labour.
Figure 1: Segment-based model of the garment global value chain
3.2. Promote sector-based and transnational 4.5. Since women represent the greatest
Figure 2: H&M roadmap towards a fair living wage
collective bargaining and urge countries to majority of garment workers, the situation
Figure 3: Basic needs included in Asia Floor Wage calculations
remove national legal barriers to these forms of of women should be urgently included in
Figure 4: Asia Floor Wage calculations consider financial dependents and corresponding
collective action. monitoring programmes to assess the spectrum
responsibility of workers
3.3. Expand work towards the elimination of their clinical, social and personal risks.
Figure 5: Progressive increase in Cambodian minimum wages, 2011-2015
of forced labour, including promoting 4.6. Require an urgent, epidemiological study
ratification and implementation of the Forced into deaths and disabilities resulting from
Labour Convention, 1930 (No. 29), Protocol conditions of work and life of garment workers.
to the Forced Labour Convention 1930 and This information should be made available
accompanying Recommendation, 2014. publicly and to international agencies.
3.4. Continue programs to ensure social
5. Organize a Tripartite Conference on the
protection, fair wages and health and safety at adverse impact of contracting and purchasing
every level of GVCs. practices upon migrant workers rights. This
4. Convene research to inform ILO global conference should focus on:
supply chain programming, including: 5.1. Protection of migrant rights as conferred
4.1. Research on adverse impacts of TNC under the UN International Convention on the
purchasing practices upon Protection of the Rights of all Migrant Workers
4.1.1. Core labour standards for all and Members of their Families.
categories of workers across value chains. 5.2. The intersection of migrant rights and ILO
4.1.2. Wages and benefits with for all initiatives to promote Decent Work in Global
categories of value chain workers. This Supply Chains.
ABBREVIATIONS AND ACRONYMS 10 11 METHODOLOGY
AFWA Asia Floor Wage Alliance
AFWA-C Asia Floor Wage Cambodia
CCAWDU Coalition of Cambodian Apparel Workers
Democratic Union
CCC Clean Clothes Campaign
CENTRAL Center for Alliance of Labor and Human Rights
GMAC Garment Manufacturers Association in Cambodia
HRW Human Rights Watch
ILC International Labour Conference
ILO International Labour Organization
ILRF International Labour Rights Forum
MLVT Ministry of Labour and Vocational Training
NCEUS National Commission on Enterprises in the
Unorganized Sector This report is based upon 251 structured interviews conducted between August and October 2015 with
garment workers in Phnom Penh, Cambodia and the Delhi, National Capital Region (NCR), India
NCR National Capital Region
This report is based upon 251 structured in the Delhi-NCR, India. Selection of factory units
SLD Society for Labour and Development interviews conducted between August and aimed to include factories with a variety of ratings
October 2015 with garment workers in Phnom under the H&M rating system on labour and
TATA Textiles and Apparel Trade Agreement Penh, Cambodia and the Delhi, National Capital environmental issues—including platinum, gold,
Region (NCR), India. Interviews were conducted silver and other.
TCLF Textile, Clothing, Leather and Footwear by the Phnom Penh based Center for Alliance of
Labor and Human Rights (CENTRAL) in Cambodia Interviews lasted between 75 and 90 minutes. All
USAS United Students Against Sweatshops and the Delhi-based Society for Labour and worker interviews were conducted in person with
Development (SLD) in India. full consent from workers. In order to protect the
WRC Worker Rights Consortium identity of workers who participated in this study,
Empirical findings on working conditions in all individual names have been changed.
H&M factories are based upon data collection To ensure that workers cannot be identified based
and analysis of working conditions in 17 H&M upon identifying case information, factories are
supplier factories, including 12 supplier factories referenced by company name but locations of
in Phnom Penh Cambodia and 5 supplier factories particular production units have been removed.
12 13
Analysis of structured interviews aimed to identify H&M Number of
Supplier
violations of rights at work protected under rating respondents
International Labour Organization standards, Hung Wah (Cambodia) Silver 15
national laws and the H&M Code of Conduct. International
Manufacturing Ltd.
NEX-T Apparel Co. Ltd. Silver 17
These findings have been situated in context
Benoh Apparel Silver 10
of the global garment production networks
Roo Hsing Garment Other 20
and previous research on H&M supply chains.
Secondary sources included reports on production Total: 201
conditions in the garment industry, academic Table 1: Overview of study respondents in Phnom
articles and newspaper reports. Penh, Cambodia
Cambodia India
In Cambodia, research included investigation of In India, research included investigation of
working conditions in 12 H&M supplier companies working conditions in four H&M supplier
(Table 1). In order to protect the identity of companies (Table 2). In order to protect the
workers interviewed for this study, names of identity of workers interviewed for this study, the
particular production units have been withheld. names of particular production units have been
In total, we interviewed 201 workers engaged in withheld.
producing H&M garments within Phnom Penh,
Cambodia and surrounding areas. In total, we interviewed 50 workers engaged
in producing H&M garments within the Delhi,
National Capital Region (NCR).
H&M Number of
Supplier
rating respondents
H&M Number of
Eastex Garment Co. Ltd. Platinum 20 Supplier
rating respondents
Fu Ling Computer Platinum 20
Embroidery Co. Ltd. Shahi Export Pvt. Ltd. Gold 19
Seduno Investment Platinum 20 Maharani of India Silver 14
Cambo Fashion Co. Ltd. Jak Group Other 7
Vanco Industrial Co. Ltd. Gold 19 Orion Conmerx other 10
Berry Apparel Cambodia Platinum 19 Total : 50
Co. Ltd.
M&V (Cambodia) Gold 15
Table 2: Overview of study respondents in Delhi-
International NCR, India
Manufacturing Ltd.
Perfect Growth Private Gold 15
Tak Son Cambodia Gold 10
(Laundry)
Interviews with workers were conducted at worker housing colonies such as this one in Gurgaon, India.
by Society for Labour and Development
14 15
Garment workers in Cambodia travel to work
by CENTRAL
16 17
This section aims to situate new empirical goods and services are traded in fragmented and
findings on working conditions in H&M factories internationally dispersed production processes.
in Cambodia and India within the broader GVCs are typically coordinated by TNCs, with
context of global production networks in general cross-border trade of inputs and outputs
and the garment global production network taking place within their networks of affiliates,
in particular. This basic overview outlines key contractual partners and arm’s-length suppliers.
shifts in employment relationships as production TNC-coordinated GVCs account for some 80 per
processes evolve to include several companies cent of global trade. (UNCTAD 2013)
across multiple countries. It also identifies trends
in concentration and distribution of control over As described by UNCTAD, GPNs shift market
production processes across various actors in the relationships between firms from trade
garment global production network. relationships to quasi-production relationships
without the risks of ownership. Within this model,
TNCs drive coordinated production of goods while
disbursing risk associated with market fluctuations
Part 1
Global production
across global value chains.
networks
Garment global
Global garment production The Global Production Network (GPN) is a production networks
term that describes contemporary production
systems, characterized by production processes As described by the International Labour
that involve several companies across multiple Organization (ILO), the Textile, Clothing,
countries. Companies linked through GPNs Leather and Footwear (TCLF) is characterized
are related through various legal forms, with by geographically dispersed production and
exchanges between firms structured so that rapid market-driven changes (ILO 2016). Brands
transnational corporations (TNCs) do not legally engage in high value market research, design,
own overseas subsidiaries or franchisees but sales, marketing and financial services. They
only outsource production to them. The UNCTAD typically outsource garment production to Tier
World Investment Report 2013 notes the structure 1 companies. Tier 1 companies may, in turn,
and prevalence of this mode of production: subcontract some or all of the garment production
process to manufacturing companies known as
Today’s global economy is characterized by suppliers. This production structure allows brands
global value chains (GVCs), in which intermediate and retailers to drive coordinated production
of goods by capitalizing upon new technology,
TNC-coordinated GVCs relaxed regulatory frameworks and a supply of
low wage labour in developing countries (Ghosh
account for some 80 per cent 2015). While brands and retailers do not carry out
of global trade. (UNCTAD production, they drive sourcing and production
patterns overseas. This production model has
2013)
18 19
been characterized as a buyer-driven value Brands typically draw a distinction between
chain (Barria 2014). According to this model, the their liability for authorized and unauthorized
structure of garment value chains can be divided subcontracts. Unauthorized subcontractors
into five main segments: may also be unregistered and therefore
outside the purview of government regulation.
Segment 1: raw material supply, including natural Due to diminished government and brand
and synthetic fibers; accountability—especially among unregistered
Segment 2: component supply, including yarn and suppliers, working conditions among garment
fabrics; subcontractors have been found to deteriorate
Segment 3: production networks, including (Kashyap 2015). Within this structure, employers
domestic and overseas subcontractors; and workers engaged in assembly operations,
Segment 4: export channels established by trade including primary stitching and embellishment,
intermediaries; have comparatively little negotiating power
Segment 5: marketing networks at the retail level. (Ghosh 2015).
(Ghosh 2015)
Firms that control design, branding and marketing
Rise in employment of
(segment 5) also control sourcing decisions. contract workers has
Production costs are one significant factor in
determining sourcing preferences. Decisions
been attributed to buyer
regarding how value addition activities and profits purchasing practices: Wages paid to Indian garment workers leave them no choice but to live in impoverished areas at the
are distributed along the value chain, in turn, have downward pressure on outskirts of production hubs.
a significant impact upon employers, workers and
markets in producing countries. Profit generation the prices paid to suppliers by Society for Labour and Development
Industrial uncertainty caused
by capitalizing upon price differentials between combined with increasingly the onset of the global financial crisis in 2007-
markets has been referred to as “global labour 2008. Rise in employment of contract workers has by buyer purchasing practices
unpredictable and extreme
arbitrage”(Roach 2004). been attributed to buyer purchasing practices:
is displaced upon workers
seasonal variation in downward pressure on the prices paid to suppliers
Assembly (segment 3) is typically separated combined with increasingly unpredictable through flexible job contracts,
production, together, require
organizationally and geographically from other and extreme seasonal variation in production, employment fluctuations
value generating aspects of the value chain. garment suppliers to reduce together, require garment suppliers to reduce
and downward pressure on
Product suppliers and their workers (segment 3)
production costs. production costs. Contract workers cost less to
depend upon orders from marketing networks, employ per unit because they often receive lower wages.
firms and brands (segment 5). Tier 1 companies wages and rarely receive non-wage benefits,
holding primary contracts with brands often Since 2010, garment brand and retail members including paid leave and social security benefits. Due to the structure of garment value chains,
subcontract production to smaller suppliers. At of the UK Ethical Trading Initiative (ETI) have These terms of employment leave contract workers bear the brunt of global uncertainties
this level of the value chain, tier 1 companies reported an increasing reliance on contract labour workers particularly vulnerable to exploitation, within the industry. Industrial uncertainty caused
compete for contracts with buyers. In a parallel within garment value chains, marked by a growth with poorer working conditions and a higher by buyer purchasing practices is displaced upon
process, subcontractors compete for contracts in the proportion the workforce that consists of risk of serious abuse when compared to directly workers through the use of flexible job contracts,
with tier 1 companies (Ghosh 2015). contract workers. Contract work is particularly employed workers (Chan 2013). unemployment due to fluctuations in production
widespread in Bangladesh, India, Pakistan and and downward pressure on wages. Obstacles to
Turkey. These trends have been associated with freedom of association and collective bargaining
further undermine workers’ negotiation power.20 21
Brand and retail codes of conduct establishing apply to factories that are owned by suppliers and
social and environmental principles have factories that receive subcontracts from suppliers.
developed in response to anti-sweatshop and
consumer-driven accountability movements in According to H&M policies on monitoring and
Europe and the United States. In some cases, grading, new partners are required to comply with
these codes of conduct have been developed the minimum requirements of the Sustainability
through multi-stakeholder initiatives, including Commitment from the outset. They must also
corporate, non-governmental organization, trade demonstrate the necessary willingness to work
union, state and academic representatives (Barria towards full compliance. When assessing a new
2014). partner, H&M policies require detailed training
in the Sustainability Commitment, compliance
H&M has explicitly recognized the need to screening and in-depth audits.
improve working conditions in their supply chains.
Their public commitment to promoting decent The Sustainability Commitment is discussed in
work has been announced in a range of initiatives, further detail in Section four of this report in
including: the H&M Roadmap to a Fair Living context of working conditions documented in
Wage; Model Factory Programme; production unit factories producing for H&M (H&M 2016C).
Part 2
disclosure; partnerships with the ILO and other
industry stakeholders; and the Accord on Fire
and Building Safety in Bangladesh [hereinafter,
“Accord”]. While codes of conduct and other Roadmap to a fair living
wage
measures described in this report constitute
Overview of H&M initiatives to promote declarations of intent, with the exception of
the Accord, they do not generate binding legal
Articulating a powerful narrative about fairness
decent work
obligations.
and respect, H&M has made commitments to
This section reviews H&M’s public commitments ensure that a fair living wage is possible for
to promoting decent work in their supply chains. workers in their supply chains. H&M launched
Where possible, it includes discussions and their roadmap to a fair living wage in 2013,
research on the efficacy of these initiatives to committing to pay 850,000 textile workers a fair
date. living wage by 2018. H&M explains their vision of
a fair living wage in the following terms:
It has always been our vision that all textile
Sustainability workers should be able to live on their wage. We
are focusing on our strategic suppliers to start
Commitment with. Our goal is that all of them should have
improved pay structures for fair living wages in
The H&M sourcing strategy commits to only allow place by 2018. (H&M 2016a)
production for H&M to take place with suppliers
and in factories that sign the H&M Sustainability The H&M roadmap towards a fair living wage
Commitment that outlines a code of conduct for considers the role of H&M together with the
suppliers. According to H&M, these standards roles of other supply chain actors in achieving a22 23
living wage. This strategy aims to address H&M
H&M´s roadmap towards a fair living wage in the textile industry
buying practices, provide training for workers to
encourage workplace representation, call upon
governments to adopt better minimum wage
H&M has developed a roadmap based on our vision that a fair H&M will continuously measure the workers own perception of
living wage covering workers basic needs should be paid by our receiving a wage covering their basic needs, which will be used setting processes and work with suppliers to set
commercial goods suppliers. It should be enabled through our as a guide in our work. The holistic approach covering H&M as up improved pay systems.
purchasing practices, and based on a skilled workforce that well as factory owners, factory employees and governments
have their wages negotiated and annually reviewed, involving
democratically elected trade unions or worker representatives.
takes the wage issue to the next level within the fashion indu -
stry, encouraging others to do the same.
Vision The term fair living wage references and combines
two distinct wage standards: a living wage
A Fair Living Wage, covering standard and a fair wage standard. A living wage
workers basic needs, should be is protected under Article 23.3 of the Universal
Factory owners paid by all our commercial goods Declaration of Human Rights and defined as a
suppliers wage on which a worker and her family can live
H&M will support factory owners to develop with dignity.
pay structures that enables a fair living
wage, ensure correct compensation and
overtime within legal limits. This will be
Factory employees While the term living wage refers to the amount
that allows a family to live with dignity, the term
explored by implementing the Fair Wage fair wage refers to wage system within a factory.
Method in our role model factories, from
which we will source 100% of the products H&M will support textile workers at our supplier As defined by the Fair Wage Network, fair wages
during five years. factories to have access to education, skill
enhancement and ensuring they are employed
entail three conditions: (1) compliance with
• By 2014, we will implement the Fair Wage at a level matching their skills. They should also national wage regulations, including minimum
Method in three model factories (one in be able to bargain collectively through elected wage standards, regular payment, overtime
Cambodia and two in Bangladesh) with a representatives.
payments, provision of paid holidays and social
first evaluation already next summer,
with the aim to be scaled up. • Starting now, we will run vocational training, insurance; (2) proper wage structures within a
a Center of Excellence, together with SIDA and company, including appropriate wages for skill
• H&M´s strategic suppliers the ILO to meet this need. We will train 5,000
students by 2016 and secure that they start at level and individual and collective performance;
should have pay structures in
place to pay a fair living wage by a wage level reflecting their skills and that they and removal of gender pay gaps; and (3)
2018. By then, this will reach around are aware of their own rights and responsi- structures that facilitate collective bargaining
850 000 textile workers. Our strategic bilities.
(McMullen 2016; FWN 2016).
suppliers are currently 750 factory units
producing around 60 % of our products. • We´ve started a skill development training
and will secure employment for 100 supervisors
With a name that integrates these standards—
Governments through our Production Management Program
in Cambodia. without, however, referencing the fair wage
H&M • We are implementing an industrial relation
paradigm—H&M uses the following definition of a
H&M will encourage governments to project in Cambodia in cooperation with fair living wage:
H&M will further improve our purchasing • Improve our purchasing plans to engage in a process to identify a living Swedish trade union IF Metall, SIDA and ILO.
practices to ensure it enables our suppliers reduce our suppliers’ production peaks wage level, set a legal minimum wage The aim is to strengthen the structures for A fair living wage should at the very least cover
to pay their textile workers for the true cost of and enable them to better prepare the accordingly and review wages annually industrial relations in the country and increase
thereafter. collective bargaining. the worker and their family’s basic needs and
labor. Starting 2014 we will: right capacity in their factories.
a discretionary income. This wage should
• Develop our price method to ensure the • Update our Code of Conduct to better • We will continue to interact with govern- • By 2014, we will expand our existing social be reviewed annually and negotiated with
true cost of labor. By doing this we secure reflect our roadmap and goals. ments and public agencies to advocate for dialogue project so that 15% of H&M´s supp-
annual wage revision and enforce labour liers are trained in social dialogue and have democratically elected trade unions. (H&M
that we pay a price which enables our supp-
liers to pay their textile workers a fair living legislation protecting the freedom of associ- freely elected Workers Participants Commit- 2016a)
wage and reduce overtime. ation. We will encourage others to do the tees, with the intention to reach 100% by 2018.
With regard to assessing basic needs, H&M
Figure 2: H&M roadmap towards a fair living wage24 25
Figure 4: Asia Floor Wage calculations consider financial dependents and corresponding
responsibility of workers
calculations on the following considerations: the AFWA carries out regular and ongoing food
• basket research (AFWA 2016a).
Figure 3: Basic needs included in Asia Floor Wage calculations • A worker needs to support themselves
and two other consumption units. [One Accounting for high inflation, Asia Floor Wage
includes the following parameters: “food, determining living wage rates (AFW-Cambodia). consumption unit supports either one adult or figures are calculated annually. As explained by
accommodation, health, education, clothing two children.] (Figure 3) AFWA Coordinator, Anannya Bhattacharjee:
and vacation/leisure. This limited list, however, Filling this conceptual gap, the Asia Floor Wage • An adult requires 3000 calories a day in order
does not include family care, transporation and Alliance (AFWA), a global coalition of trade unions, to carry out physically demanding work in The gap between the minimum wage and the
discretionary income (CCC 2014).” On the basis workers rights and human rights organizations, good health. cost of living has widened in recent years. High
of this criteria, H&M reports working closely expands upon this definition and provides a • Within Asia, food costs amount for half of a inflation has sent the cost of living soaring in
with two factories in Bangladesh and one in detailed formula for calculating living wages worker’s monthly expenditure. many Asian countries, but starting salaries remain
Cambodia to poll workers and understand their across national contexts. The AFWA definition of a unchanged—often for several years.
wage needs. As of March 2015, H&M claimed living wage specifies that living wage calculations Based upon these assumptions, the Asia Floor (Pasariello 2013)
that the average wage in their Cambodian pilot must include support for all family members, basic Wage is calculated in Purchasing Power Parity $
programmed reached USD 216 per month before nutritional needs of a worker and other basic (PPP$). This fictitious World Bank currency is built AFW annual wage figures are therefore calculated
overtime. H&M refused however to disclose needs, including housing, healthcare, education upon consumption of goods and services, allowing annually based upon up to date national food
the name of the factory. Although H&M aims to and some basic savings. standard of living between countries to be basket research. For instance, the 2015 Asia Floor
roll out this method to all other suppliers, they compared regardless of the national currency. In Wage figure is PPP$ 1021. These wage figures are
have not released a formula or methodology for The Asia Floor Wage Alliance bases their order to calculate annual Asia Floor Wage figures, then converted into local currency (Table 3)(AFWA
2016b).26 27
Table 3: 2015 Asia Floor Wage Figure in
local currencies Model factory Outcomes of the Model chains calls into question the scalability of any fair
wage models developed with the model factory
Factory Programme are
Country
Asia Floor Wage in local Programmes impossible to verify since
programme (CCC 2016b).
currency
H&M has announced living wage pilot H&M has refused to disclose
Production unit
Cambodia 1,630,045 Riel
India 18,727 Rupees (INR)
programmes in three role model factories—two
in Bangladesh and one in Cambodia. H&M claims
the names of model factories.
Indonesia
Sri Lanka
4,684,570 Rupiah
48,608 Rupees (SLR)
that these pilot programs are testing a fair wage
method, which includes encouraging workplace According to H&M reports, the pilot programs
disclosure
negotiation and developing a wage structure in Bangladesh and Cambodia have had positive
H&M started public disclosing suppliers in 2013
that rewards skill, seniority and performance. outcomes. Early data released by H&M reported
The AFW wage calculation method provides an and updates supplier lists annually. In 2014, H&M
H&M reports that these practices are increasing that overtime in the Cambodian factory was
instructive model for H&M and other brands in expanded their supplier lists to include factories
productivity within supplier factories. H&M also reduced to 34 hours a month, take home pay
setting living wages that correspond to workers that are approved to perform subcontracted or
reports that they are changing their approach has increased and workers satisfaction with pay
needs and consider rising costs of living. designated outsourced work (Donaldson 2015).
to negotiating prices with suppliers to ensure systems has also increased 94% (H&M 2015a).
Lists of suppliers and designated subcontractors
negotiations do not have a negative impact upon are available on the H&M website.
wages (McMullen 2016). These outcomes, however, are impossible to
verify since H&M has refused to disclose either
According to an April 2014 letter from H&M to
the names of model factories in Bangladesh and
ROLE MODEL FACTORY Reduced over time hours
Reduced overtime helps improve
productivity while maintai-
Workers wage interviews
Yearly workers interviews to
understand to what extent wages Cambodia or the methodology for determining
Human Rights Watch, within Cambodia, H&M
Leadership in sustainability goes well together with good performance in other areas, our role model ning/increasing the take home are covering rent, food, clothes,
has distributed a translated copy of its suppliers’
wages. H&M has maintained the secrecy of
factories are a proof of this. In our model factories, we will identify best practice examples to scale up wage (i.e. same/higher wage for medical, education and discretiona-
to other factories and hopefully inspire the whole industry. H&M will buy 100% of the role model fewer hours). ry income.
factories’ capacity for a five-year period.
list to local unions and labour rights groups to
these facilities despite numerous requests for
The workers own perception serves
as wage benchmark on the progress
encourage whistleblowing in cases of abusive
towards fair living wages.
information from Asia Floor Wage Alliance (AFWA)
labour practices (Kashyap 2015).
Wage negotiations and pay systems
Workers needs survey
Individually and collectively negotiated
wages between employer and freely
elected workers participating committees.
Workers’ immediated needs
are surveyed through supplier
and Clean Clothes Campaign (CCC) partners—
global coalitions of trade unions, workers rights
Skills evaluation programs, such as transport-
Negotiations based on skills and experience ation, nutrition, health, water,
Individual evaluation of skills
Public disclosure of suppliers provides a step
while rewarding performance. sanitation, hygiene.
ensuring accurate wage category.
and human rights organizations engaged in
30
25
20
15
A wage progress that is in proportion to
10
Individual job assignment reflecting
5
toward accountability by allowing labour rights
0
inflation, suppliers profit and growth. the workers’ skills.
Workers with a good knowledge about
promoting decent work in garment global supply
groups, the government and other parties to
their wage entitlements and the minimum
wage level.
chains.
Sustainability and human
resources organization
monitor labour rights in their direct supplier and
Well-functioning internal
subcontractor factories.
In addition to complete lack of transparency, the
organization with clear roles
and responsibilities, commit-
ted to the role model factory
Model Factory Programme has been critiqued on
program.
Reduced carbon footprint the grounds that it is unlikely to scale well to the
Partnership projects
Employment contract and
Continuously increase share of wage payment
low carbon and renewable energy.
Individual employment
contracts, specifying condi-
rest of the H&M production network. H&M model
tions for employment.
Wages paid regularly and
factory programs have allegedly been launched in
factories where H&M owns 100% of the output.
in full with a detailed pay slip.
Equal wage for equal work
and overtime hours are H&M has signed partnership agreements with
correctly compensated.
This type of direct production relationship is
Good water quality
The minimum wage level the International Labour Organization (ILO) and
Appropriate waste water treatment is the floor.
uncommon both within the H&M production
a range of sustainability initiatives and brands.
meeting BSR waste water quality
standard.
Continuously increase water recycling network and the global garment industry where
rate. Resource efficient wet processes Chemical management Increased use of sustainable materials
These partnerships uniquely position H&M to
The factory’s own sourced mills comply
Resource efficient dying and washing, Full chemical inventory is kept and usage of The factory should be certified to manu-
Tier 1 companies and suppliers typically produce
develop models that promote decent work across
applying innovative techniques for best chemicals meets H&M chemical restrictions facture with sustainable materials and able
with BSR waste water quality standard. to trace sustainable materials to fibre level.
practice on energy, water and chemical use. and requirements.
for multiple brands—often simultaneously. This
supply chain contexts and play a role in setting
System to manage environmental perfor- Continuously substitute to better chemical
mance data such as energy, water, chemicals solutions.
discrepancy between the context of model factory
and waste.
Disclosure of chemical discharge to ensure
zero discharge of hazardous chemicals.
industry standards.
programs and the reality of garment supply28 29
The most recent H&M-ILO partnership, initiated
in September 2014, aims to promote sustainable
•
•
Transparency International Sweden
Circular Economy 100 Accord on Fire and retailers to require their factories to undergo
essential safety renovation, provide financial
global supply chains in the garment industry.
Target areas for intervention include joint Building Safety in assistance to factories to conduct renovations as
needed and stop doing business with factories
While the H&M website
initiatives on industrial relations and wages;
training and skill development in factories H&M presents a long list of
Bangladesh that fail to undertake renovations according
to deadlines established by the Accord’s
sources from; and initiatives to strengthen independent inspectorate. Accord inspections
employers’ and workers’ organizations in the collaborative partnerships On April 24, 2013, the Rana Plaza, an eight-story
are undertaken by qualified safety engineers with
commercial building, collapsed in Savar sub-
global garment industry. This new partnership and research turns district in the Greater Area of Dhaka, Bangladesh.
in-depth expertise in fire, building and electrical
builds upon previous cooperation between the safety. To date, more than 200 brands have joined
ILO and H&M in 2005 when H&M joined the ILO out numerous press The Rana Plaza industrial factory fire that
the programme.
Better Factories Programme (BFC) In Cambodia— announcements of declared killed 1,139 workers and injured 2,500 more is
considered the most serious fatal accident to have
now mandatory for all Cambodian garment
partnerships, action taken occurred in a textile factory in modern history. Due to failed compliance with
manufacturers. H&M has also collaborated
with the ILO to introduce training and skill under these collaborations is Following the devastating collapse of Rana the Accord, 78,842 garment
Plaza, H&M was the first and largest buyer to
development programmes in Bangladesh and has not easily available. sign the 2013 Accord on Fire and Building Safety
workers in Bangladesh
joined the ILO Better Work Programme which
expands the BFC Cambodia Programme to cover However, while the H&M website presents a long
in Bangladesh. The Accord is a legally-binding continue to produce garments
Vietnam, Jordan and Lesotho (ILO 2016). list of collaborative partnerships and research
agreement that commits signatory brands and
for H&M in buildings without
H&M is also aligned with a range of sustainability
turns out numerous press announcements of
declared partnerships, action taken under these
Victims trapped by rubble of Rana Plaza fire exits.
by 13maggio 2013 licensed under CC by 2.0
initiatives with varied compositions, including collaborations is not easily available (H&M 2016b).
brands, trade unions and non-governmental Cambodia was, however, chosen as the first
organizations. These include: country in which to start the ACT Process. This
process initiated by IndustriALL aims to develop
• Ethical Trading Initiative (ETI) industry-wide collective bargaining in Cambodia
• Sustainable Development Goals Fund and other garment-producing countries, backed
• Business Call to Action by reformed purchasing practices among brands
• Sida and Swedish Leadership for to ensure that higher wages can be paid. In
Sustainable Development September 2015, the ACT delegation, consisting
• Solidaridad of IndustriALL and representatives from brands
• World Wildlife Fund (WWF) including H&M, Inditex, Primark and C&A
• UN Global Compact (UNGC) explained the process in a series of meetings with
• Sustainable Apparel Coalition (SAC) suppliers, garment unions, the Labour Ministry
• Better Cotton Initiative and the Ministry of Commerce and the garment
• Fair Wage Network manufacturers association of Cambodia (GMAC).
• Business for Social Responsibility (BSR) At the time of writing, no concrete outcomes had
• Buyers Forum Bangladesh been realized under this process (AFW-Cambodia).
• Brands Ethical Working Group India
• CEO Water Mandate
• Leather Working Group
• Clean Shipping Group30 31
Although H&M was not producing at Rana
Plaza during the disaster, they continue to make
clothing in Bangladesh. H&M is currently one of
the biggest apparel buyers in Bangladesh, taking
in roughly USD 5 billion in garment goods each
year (Donaldson 2016a).
While H&M was the first signatory of the remedial
accord, the gesture to date has proved largely
symbolic. According to a September 2015 report
by Clean Clothes Campaign (CCC), International
Labour Rights Forum (ILRF) and Worker Rights
Consortium (WRC), H&M is far behind in
completing the required fixes.
Focusing on the subset of contract factories that
H&M has deemed the best performers in its
supply chain on labour and environmental issues,
the report shows that all of these factories have
failed to meet mandated timeframes for repairs
and the majority of all renovations have still
not been completed despite lapsed deadlines.
Required renovations range from designating clear
fire exits to installing fire-grade doors that do not
automatically lock workers into burning factories.
Due to failed compliance with the Accord, as of
2015, 78,842 garment workers in Bangladesh
continued to produce garments for H&M in
buildings that did not have fire exits (CCC 2015).
Thousands of garment workers and their unions
rally on the one-year anniversary of the Rana
Plaza collapse that killed more than 1,100
garment workers.
licensed by the Solidarity Center under CC 2.032 33
2000 2003 2008 2013
TOTAL (in billion 197.64 233.23 363.87 460.27
US$)
China 18.25 22.32 33.09 38.55
Bangladesh 2.56 2.42 3.21 5.11
Hong Kong, China 12.25 9.93 7.67 4.77
Viet Nam 0.92 1.49 2.40 3.74
India 3.02 2.71 3.01 3.66
Indonesia 2.40 1.74 1.73 1.67
Cambodia 0.49 0.69 0.83 1.11
Malasia 1.14 0.88 1.00 1.00
Pakistan 1.08 1.16 1.07 0.99
Srilanka 1.42 1.08 0.94 0.98
Export Share of top 43.54 44.41 54.95 61.57
Part 3
10 Asians
Export Value of top 86.06 103.59 199.94 283.38
10 Asians
Table 3: Asian countries’ share of global apparel exports, 2000-2013
Globally, Asia tops apparel exports worldwide. In than in China, Chinese firms retain a competitive
Asian garment value chains 2013, more than 60% of the 460.27 billion dollars
in global apparel exports originated from 10 Asian
advantage in the non-labour components of their
costs (Ghosh 2015).
countries, including—in order of market share:
China, Bangladesh, Hong Kong, Viet Nam, India, Due to a range of factors—including poor
Indonesia, Cambodia, Malaysia, Pakistan and Sri capacity, limited resources, infrastructural needs
Lanka (Table 3). and, in some cases, adverse disposition towards
protective labour standards—national labour
Concentration of garment production in Asia can standards in producing countries remains weak.
be attributed to a range of factors. Low wages, Proclivity toward driving down labour standards,
government policies, trade practices, transaction furthermore, is often linked to dominant
time, currency appreciation and infrastructure global policy frameworks that prescribe labour
availability all influence the location of global deregulation as a prerequisite to attracting
production network activities. For instance, China investment capital (Ghosh 2015).
has systematically leveraged economies of scale
through major investment in the infrastructure The following sections provide an overview of
of supply-chain cities. These global supply chain garment value chains in Cambodia and India.
hubs lower transportation costs and increase the These country-level overviews provide basic
rate at which goods enter the market. Accordingly, information on market structure and workforce
although labour costs are much lower in India demographics.34 35
The US, EU, Canada and Japan are the largest province. In these areas, factories vary in size and
importers of Cambodian garments, textiles and operations, ranging from export licensed factories
shoes (Kashyap 2015). At the time of writing, top with up to 8,000 workers to small, unmarked
brands sourcing from Cambodia include H&M, factories employing fewer than 100 workers.
GAP, Levi Strauss & Co., Adidas and Target (CCC These smaller factories largely fill subcontracts
2016a). for larger suppliers. Outsourcing of production
to smaller factories may be either authorized or
The Cambodian garment industry is largely unauthorized by apparel brands (Kashyap 2015).
foreign-owned, with Cambodians owning
less than 10% of factories (Kashyap 2015). An Women between the ages of 18
estimated 85% of garment factories located in
Cambodia are foreign controlled, predominantly
and 35 dominate the Cambodian
by investors from China, Hong Kong, Malaysia, garment production sector,
Singapore, South Korea and Taiwan (Kashyap comprising an estimated
2015; CCC 2016). Foreign owned companies have
kept the production processes within Cambodia 90-95% of the industry’s
limited. The majority of factories undertake “cut- estimated 700,000 workers.
make-trim” production functions—manufacturing
clothes from imported textiles based upon designs Women between the ages of 18 and 35 dominate
provided by international buyers. This exclusive the Cambodian garment production sector,
focus on producing garments circumscribes the comprising an estimated 90-95% of the industry’s
range of employment available to firms and estimated 700,000 workers (Barria 2014; Kashyap
workers in Cambodia (Ghosh 2015). 2015). These numbers do not, however, include
Women dominate the Cambodian garment production sector, comprising an estimated 90-92% of the women engaged in seasonal, home-based
industry’s 700,000 workers. garment work (Finster 2015; Kashyap 2015).
Cambodian garment workers, exact location undisclosed, by Asia Floor Wage Alliance.
The garment industry has been a major source
of employment for young women from rural
Cambodia Today, garment and textile exports are critical
to the Cambodian economy. In 2013, garments
areas who migrate for employment to garment
production hubs (McMullen 2013). In a February
Cambodia entered the export-oriented global accounted for 13% of the Cambodian GDP (CCC 2012 hearing before the Permanent People’s
garment and textile industry in the 1990s with the 2016a). Cambodian global exports amounted to Tribunal held in Phnom Penh Cambodia, Asia
passage of the 1993 Constitution of the Kingdom roughly USD 6.48 billion, of which garment and Floor Wage Alliance-Cambodia (AFWA-C) reported
of Cambodia which established a free market in textile exports accounted to USD 4.96 billon. By that these internal migrants work far from their
Cambodia (CCC 2016a; CCHR 2014). Between 2014, garment exports totaled USD 5.7 billion. families and communities and are thereby cut off
1995 and 2006, bilateral trade agreements with from traditional support networks. Despite their
the United States, the European Union and
At the time of writing, numerical majority within the garment sector,
Canada spurred growth in the garment industry. top brands sourcing from they remain within low skill level employment and
rarely reach leadership positions in their unions
With the exception of a downturn in 2008 during
the global economic crisis, the industry has shown
Cambodia include H&M, GAP, Phnom Penh is a hub for garment factories. (Barria 2014).
consistent growth (Kashyap 2015). Between 1995 Levi Strauss & Co., Adidas However, garment production has expanded
to other areas, including the adjoining Kandal
and 2014, the sector grew 200-fold (ILO 2015). and Target.You can also read
