Yunus calls for change in garment industry

Muhammad Yunus

Banker and economist Muhammad Yunus has long been acknowledged as a man of ideas, having won the Nobel Peace Prize in 2006 for his grassroots Grameen Bank and the US Congressional Gold Medal in 2010. His latest award came on August 27 when he received the 2013 National Human Rights Award from the Bangladesh Human Rights Commission. As the apparel industry in Bangladesh has gone through a period of trauma over the last nine months with the deaths of more than 1,200 workers, Yunus has spoken about some of the key issues at hand, using his business acumen and perspective to shed light on a situation that sometimes seemed impossible to resolve as workers blamed employers who blamed international retailers and so on. Here, Yunus talks with WWD about some of his recent initiatives and concerns.
WWD: Do you feel that the Garment Industry Transparency Initiative has potential to change things for the garment industry?
Muhammad Yunus: Well, we're working to create a Garment Industry Transparency Initiative following the example of the Extractive Industry Transparency Initiative. EITI is an international standard that ensures transparency around countries' oil, gas and mineral resources.
In this, we hope that government and industry representatives, workers, international organisations such as the International Labour Organisation and other international agencies will join us. We're saying this has worked for extractive industries so it could certainly work for the garment industry.
This index would evaluate companies that are doing a good job, particularly in terms of fire safety, work safety overall and treatment of women, and also focus on setting principles, standards, requirements, memberships, penalties, oversight, monitoring, validation, etc. On the basis of this index, we will rank the companies. One GITI issue will be that of exploitation. Germany is taking the lead in this initiative. I proposed it to them, and they picked it up enthusiastically.
The government, the buyers all know about the garment industry only in bits and pieces, the complete picture remains unknown to them. We want to put everything on the table to ensure clarity. This initiative is already moving, it is in action and it would be made very clear that no-one is imposing anything.
WWD: You have pioneered the idea of using business principles to solve social problems. Can you think of some ways to apply that way of thinking to the apparel manufacturing industry in Bangladesh to solve some of the issues there?
MY: When I say social business, I mean the idea of business with a cause. In this form of business, the company can recoup their money invested but cannot take any dividend beyond that. In the case of the garment industry, we are thinking about creating social business to help the workers by creating a tag—the “Happy Workers” tag.
This will be done as a social business. It will come at a small cost, with the buyer paying 10 percent more over the production cost. That is, if the shirt costs $10 in production, they will pay $1 more, which will go to a social business company. If a million shirts are produced at this price, social business will get a million dollars. The buying company will have a contract with this social business company that they'll provide, say, health insurance, mother care, education for children, help finding housing, employment benefits, whatever is important for the workers, in exchange for the money they received through the tag. The buying company will identify which workers will receive these benefits and for how many months or years.
The consumers will be told clearly what those “Happy Workers” tags stand for, and once they know that they have helped someone to have a better life, they wouldn't mind paying more for the shirts with “Happy Workers” tags. If the consumers respond positively, this process will become attractive to the companies. This way, the consumers will be able to follow the benefits to the workers through the website of the social business company.
WWD: Do you think that companies would really agree to spend 10 percent more?
MY: This is based on the consumer-worker relationship. Ten percent extra on the production cost paid by the buying companies is not coming out of the pocket of the company, but out of the pocket of the consumers, who do not mind paying a little extra when they know what it is for.
The brand or retailer also benefits, because they can ensure that they build their name and reputation, and a level of trust with the consumers.
We are not disrupting anything with this idea—but rather adding value. The label will become popular, and the situation for the workers will improve with every dollar that will go to the social business company. This appears to be an attractive idea—for example, Lily Cole said she would be a part of it to promote the “Happy Workers” tag. As we go forward, the circle of volunteers and promoters will certainly keep on increasing till it becomes a consumer movement. So the ultimate beneficiary becomes the poor women who work in Bangladesh, or anywhere in the world. This program should not be limited to Bangladesh, it will be operating in all the garment producing countries.
WWD: You have said that consumers would be willing to pay for happy workers. But customers too are resistant and sensitive to price hikes.
MY: The garment industry today is a modern sector and an international sector. It belongs to the same ecosystem as the business in the rich countries. We should look at garment industry problems in this perspective, not just dismissing them as problems of some poor countries. We can no longer say this is just Bangladesh's headache—but it is a headache of the entire business—nobody can escape from it. I think international companies will be proud of saying that they are “exploitation-free” companies, even if it costs them a little bit more. But they can take care of it in a very simple way, by bringing the consumers into the picture and making them feel that they are promoting a powerful cause with a very small cost. They will also get the express solidarity of the workers across the world. This may create happiness on all sides.
WWD: Do you have any companies signed up to try this already?
MY: I'm still trying to explain the concept to the relevant constituencies. I don't want just me to do it without getting the others on board. I try to explain that through this initiative we can help continue and strengthen the transformation process that Bangladesh is going through of empowering women who come from villages. These women move from a life of poverty to work in factories, live independently in cities away from their families, and find change from rural norms. They earn their own money and gather economic strength. All of these factors have a profound impact on society and cause a slow and steady change. This transforms the traditional way of thinking about women who don't step out of their homes. Now they are free. Nobody could have done it better in any other way. This has created a new Bangladesh.
WWD: You have spoken about the importance of establishing an international minimum wage of 50 cents an hour in Bangladesh for apparel workers. Is this any closer to happening?
MY: Part of international business is to ensure that everyone associated with the business has a dignified life. I'm just saying double whatever it is in Bangladesh at the moment; it is so low now. I'm not saying this should happen only in Bangladesh but in Vietnam, Cambodia, in any country. The garment industry should be exploitation-free.
I'm talking to the chief executive officers of buying companies—I do not want this initiative to come as an imposition from the country government or the United Nations, but rather by the companies themselves. I want them to stand up and say that they don't believe in exploitation.
WWD: What else can the international retailer or brand do?
MY: There is always the compliance issue. A company that picks up an order should say clearly that the wage bill is a nonnegotiable cost, and that they are only willing to negotiate the rest of the price. If one CEO agrees and says, “I am going to follow this because we are an 'exploitation-free company,” then others will follow. That's what I'm looking for, a company that will take the lead. The dialogue is on, and I hope it's not just one, but many CEO'S who will come forward to make this a reality.
WWD: What should companies be doing and taking into consideration if they want to continue to produce in Bangladesh?
MY: First, we have to think about it in the 21st-century way. We are not looking for the best way to exploit powerless countries and people. Those days are gone. Businesses have to be different because consumers are different.
Nobody wants to wear clothes made by slave labour or child labour or made in sweatshops. It's not about finding the cheapest solution, but to make sure it is the cheapest after guaranteeing that the workers have a decent life. There is no need to hide the situation of the workers. Companies can stand tall and talk about how they are benefiting workers. We want to make sure that a few industry leaders will come forward and set the standard. Once it is a trend, it will catch up fast.

WWD: What is your opinion of the Accord on Fire and Building Safety in Bangladesh (H&M, Carrefour and other mainly European) and the Alliance for Bangladesh Worker Safety's agreement (Wal-Mart, mainly American brands)? Do you feel one plan is better than the other?
MY: They all are very important initiatives. One of the things I kept saying as Rana Plaza happened is that we should not get into the blame game. Instead, let's get going and see what should be done. People are coming forward and seeing how they can help. We should be setting a standard for the future.
Even the competitors must realise that they are in the same industry doing similar work, even though it is coming from different countries, different directions and in different languages.
They have a common problem to solve. Now they are making statements and making their concerns public. But the important thing is to make sure the promises that are made are kept. These should translate into action. We need a regular reporting system—there should be a clear way to revisit these issues.
WWD: Are labour groups and union leaders in Bangladesh seeing much dissent among themselves?
MY: That's true everywhere. A diversity of opinions and ideas is healthy and brings a certain cohesion. You don't agree on every issue, but it's important to get the core issue right. One of the things that we should be careful about is that when a brand gives a company in Bangladesh an order, they should also be made responsible for the smaller companies that are used as subcontractors.
WWD: Fast Retailing's Uniqlo recently opened two stores in Dhaka, Bangladesh, in cooperation with Grameen Healthcare Trust. Do you think more retailers should consider projects like this? Do they really work?
MY: I am very familiar with their work because I helped create this joint venture company. It's a social business producing products that were not produced before and is aimed at the very low-income consumers. Their intention is not to make personal profits, but to solve the problems. They sell through stores and also with door-to-door sales in villages. In the next two years, they will have 30 such stores. The idea is that the store should not lose money, but at the same time serve the social cause of providing attractive clothes for poor customers.
WWD: The role of the Bangladesh Garment Manufacturers and Exporters Association has been criticised in that it is an organisation of the employers and does not have the best interest of workers at heart. Yet it is the most powerful organisation for mediating between global companies, employers and workers. Are the doubts about them unfair?
MY: BGMEA has developed the industry, but they are also being blamed for the mistakes that they have made. However, it has worked for the industry for a long time, now we have to improve it, make it more transparent.
WWD: Some people feel that even if the minimum wage is increased, the real problem is the unstable political situation and the number of strikes that have been causing tremendous losses in terms of production, transportation and meeting deadlines.
MY: Bangladesh has to deal with this, the industry cannot deal with it alone. We have to all collectively see that the economy does not become a victim of politics. It's a matter of concern to everybody in Bangladesh, including those who initiate the strikes themselves. The garment industry is the core of the Bangladesh economy. Until some years back, the industry did not exist. Now Bangladesh is number two in the whole world. What a pleasure for Bangladeshis! What an achievement! This is something we must protect.

The interview is an abridged version.