Editor: GIZ has been working in Bangladesh on behalf of the Federal Ministry for Economic Cooperation and Development (BMZ) since 2006 to promote compliance with social and environmental standards in textile factories. In this connection, GIZ also forms partnerships with international retail chains. Why would you do that?
Shrestha: Partnerships with buyers from retail chains have a number of advantages. The fact that buyers award contracts to companies gives them different kinds of leverage. The codes of conduct of all international firms, for example, now require compliance with international environmental and social standards. Pressure from consumers has seen to this.
For us, the business relationships of these chains open doors into the factories. We can then take our basic approaches into the factories and show the retail chains and the managers of supply companies alike that they can improve their standards, while increasing their productivity at the same time. This allows us to achieve our objectives far more quickly and sustainably.
What do you mean by 'more sustainably'?
Our project concept is to use the access that we gain to suppliers' factories to train local service providers - in conjunction with international experts. Local expertise is scarce: factories often lack the necessary knowledge, information, and skills to improve their social and environmental compliance status. Thus, training consultants enables us to build up a market in this country for qualified consultants who advise additional factories in the future. On the one hand, the retail chains monitor progress in their suppliers' factories and make sure that they comply with the standards; on the other hand, the factories need professional advice on how to implement the required standards. We are thus using market mechanisms to ensure that there will be demand for these services, even after the projects is completed.
A little bit of money goes a long way.
But it is surely in the interest of the retail chains themselves that their suppliers work according to the required standards. So why aren't they financing such projects by themselves?
The retail chains do not see it as their role to provide education and training programmes for their suppliers. They would prefer factories to do it themselves or purachse the required consultancy services in the local market. To date, however, these services have been virtually non-existent in Bangladesh. It is exceptionally difficult to find the necessary expertise. This has changed as a result of the collaboration between the retailchains and GIZ. Some suppliers now contract the required services directly from consultants we have trained - after being asked to do so be the retail chains.
So the suppliers respond to pressure from their costumers, the clothing chains? Do the factory owners stand to gain anything from environmental and social standards?
Entrepreneurs gain in more ways than one. By complying with the standards, they secure their orders from the clothing chains for the long term and can produce more efficiently. There is clear evidence that staff turnover and absenteeism rates fall if working conditions are good. Costs are reduced in the medium term by improved chemical management and energy efficiency. The overall ability of these companies to compete is enhanced.
You have mentioned several aspects of environmental and social standards, Are these two standards somehow connected?
Oh yes indeed! Environmental standards have numerous social aspects. Think about handling chemicals, for example. If you improve chemical management, you automatically increase the safety of the employees who work with chemicals. Or take the issue of energy efficiency: many of the fires that have claimed numerous victims in this country were caused by improperly installed electrical wiring or faulty electrical equipment. Consultants trained by us are tackling these problems. And these are just a couple examples. There are many more.
Will cooperation with retail chains and factories continue to be based on jointly financed projects, in your view?
No, the nature of cooperation is changing. The clothing chains have gained confidence in our approach - they have seen that it works and how it works. Some of them are now proceeeding without our help by bringing factories and services of GIZ directly in the framework of regional projects by making a very substantial financial contribution.
You have already achieved a great deal with your concept here in Bangladesh. Can this approach be transferred to other countries or industries? And who can use it?
We have organised the entire training concept in modules, so it is very flexible. Depending on their requirements, retail chains and supplier companies can request a package of services that includes energy efficiency, chemical management, social standards, or productivity. This is not restricted either to the textile industry or to a specific country, as can be seen by the fact that some of our business partners are transferring the concept tested here in countries like India, Sri Lanka, and Thailand.
It is amazing how much change can be brought about with a relatively small amount of money.
Looking at the situation in Bangladesh over the last five years, have there been any political or social changes in this country as a result of your work?
There has actually been a great deal of change! The government, factory managers, industry associations, and the general population have become aware of environmental and social standards. Factory owners are familiar with national employment laws, and child labour, for example, has become far less common. Many managers know that the situation with regard to the environment is bad and see that things have to change. The government is imposing stiffer penalties on textile factories that release untreated wastewater into rivers. That was unthinkable even two years ago.
I also find it quite significant that there is greater acceptance of the participatory committees that we helped set up in some factories for consultation on social standards. These committees, which are made up of workers, middle and senior management, and staff council, seek to resolve conflicts peacefully. this is a positive development but there is still a long way to go until the working conditions are very good across the entire RMG sector in Bangladesh.
How does the legal situation look?
The laws in this country are adequate, but they are frequently ignored. The government acks manpower to enforce them. For example, there are currently only 15 environmental inspectors who, needless to say, are completely unable to cope with around 4,500 factories...
Recently the government nearly doubled the minimum wage for workers in the clothing industey. While wages are still very low, this is nevertheless an important milestone. Environmental legislation is another issue that concerns us. We are working with the government on a standard and regulations for the disposal if textile sludge. There are no such regulations at the moment.
If you look back on the joint projects with the private sector, how cost-effective has this cooperation been?
A little bit of money goes a long way. The pressure exerted by the clothing chains on their suppliers has enabled us to help bring about sustained change in factories and develop a market for services. To achieve this success, we needed the partnerships with the clothing chains and they needed us - we have the necessary technical know-how and good contacts with the government and industry associations. It is amazing how much change can be brought about with a relatively small amount of money.
The interview was first published in the GIZ brochure "Collective change - collective action" in February 2013.