The Impact of Covid-19 on Workers & Businesses at the Bottom of Global Garment Supply Chains

Mark Anner, Ph.D.,
Director, Center for Global Workers’ Rights in Association with the Worker Rights Consortium

A Research Brief by the Center for Global Worers´Rights (CGWR) draws from responses from an online survey of Bangladesh employers, administered between March 21 and March 25, 2020, to document these trends. It reveals the devastating impact order cancellations have had on businesses and on workers. Crucially, it illustrates the extreme fragility of a system based on decades of buyers squeezing down on prices paid to suppliers: factory closures, unpaid workers with no savings to survive the hard times ahead, and a government with such a low tax revenue that it has very limited ability to provide meaningful support to workers and the industry.

Executive Summary

The global Covid-19 pandemic has had a devastating impact on global garment supply chains, and the situation will get far worse before it gets better. As clothing outlets have been shut by lockdowns in developed market economies, sinking demand for apparel, brands and retailers have moved quickly to cancel or postpone production orders – refusing, in many cases, to pay for clothing their supplier factories have already produced. The result has been the partial or complete shutdown of thousands of factories in producing countries. As a result, millions of factory workers have been sent home, often without legally-mandated pay or severance.

This Research Brief draws from responses from an online survey of Bangladesh employers, administered between March 21 and March 25, 2020, to document these trends. It reveals the devastating impact order cancellations have had on businesses and on workers. Crucially, it illustrates the extreme fragility of a system based on decades of buyers squeezing down on prices paid to suppliers: factory closures, unpaid workers with no savings to survive the hard times ahead, and a government with such a low tax revenue that it has very limited ability to provide meaningful support to workers and the industry.

1. Since the coronavirus pandemic took hold, more than half of Bangladesh suppliers have had the bulk of their in-process, or already completed, production canceled (45.8% of suppliers report that ‘a lot’ to ‘most’ of their nearly completed or entirely completed orders have been canceled by their buyers; 5.9% had all of these orders canceled). This is despite the fact that buyers have a contractual obligation to pay for these orders. But many are making dubious use of general force majeure clauses to justify their violations of the terms of the contract.

2. When orders were canceled, 72.1% of buyers refused to pay for raw materials (fabric, etc.) already purchased by the supplier, and 91.3% of buyers refused to pay for the cut-make-trim cost (production cost) of the supplier. As a result of order cancellations and lack of payment, 58% of factories surveyed report having to shutdown most or all of their operations.

3. More than one million garment workers in Bangladesh already have been fired or furloughed (temporarily suspended from work) as a result of order cancellations and the failure of buyers to pay for these cancellations. Suppliers in the survey reported that 98.1% of buyers refused to contribute to the cost of paying the partial wages to furloughed workers that the law requires. 72.4% of furloughed workers were sent home without pay. 97.3% of buyers refused to contribute to severance pay expenses of dismissed workers, also a legal entitlement in Bangladesh. 80.4% of dismissed workers were sent home without their severance pay. This is despite the fact that many brands have “responsible exit” policies, in which they commit to support factories in mitigating potential adverse impacts to workers should they decide to exit.

4. The survey findings presented in this report depict the most comprehensive evidence to date on the depth of the crisis in Bangladesh. The essential dynamics presented here are evident in garment exporting countries worldwide.