Garment Brands Failing on Pledge to Raise Prices

IndustriALL, one of the largest federations of trade unions around the world, said on Wednesday that it was disappointed in a group of major international brands that appear to have largely ignored a pledge made last year to help Cambodian factories pay their workers a higher minimum wage.

In September 2014, IndustriALL hailed the “unprecedented” move by the eight brands to raise the prices they paid Cambodian factories for their garment orders so that the factories could in turn pay higher wages to workers. The Garment Manufacturers Association in Cambodia (GMAC) also welcomed the pledge, while the largest independent union in the country called it “an important development.”

The government has bumped up the garment sector’s monthly minimum wage twice since then, first from $100 to $128 and—starting in January—to $140. But the eight brands appear not to have raised their prices, according to IndustriALL.

Among the brands that joined the pledge was Swedish clothing giant H&M, which places more orders in Cambodia than any other buyer. It was joined by C&A, Inditex, New Look, Next, the N Brown Group, Primark and Tchibo.

“Last year, that was the strongest statement that they ever made, and they made it public, that says ‘We would pay more to accommodate any agreed minimum wage increase,’” IndustriALL general secretary Jyrki Raina said on Wednesday in Phnom Penh during a break in the union federation’s annual executive committee meeting.

“This, to a great extent, has not happened,” he said.

Mr. Raina said part of the problem may lie with IndustriALL making the pledge with the brands’ corporate social responsibility (CSR) people, rather than those responsible for making orders and paying for them.

“The global brands, they have great names—H&M, Inditex, Gap and all the others—but we’ve seen that their internal organization is far from perfect. So it meant that these CSR people, the sustainability people…their basic task is to make sure that bad news, bad things don’t happen. But they haven’t traditionally had a link to the buyers and to their global production system,” he said.

“If these guys aren’t talking to each other…it will not go to the right people, so it has to be taken to the leadership of the whole company. So I’m disappointed that the brands have not apparently increased their prices,” Mr. Raina added.

The brands, as a matter of policy, won’t reveal the prices they pay their suppliers—not even to IndustriALL, the group that convinced them to make the pledge in the first place, he explained.

In September, GMAC said that 99.4 percent of the member factories it surveyed reported receiving the same prices from their buyers as the year before—or less. It said a third of the factories that responded claimed to be getting up to 10 percent less.

Because the brands won’t reveal the prices they pay, there is no way to confirm the claims.

Since the GMAC survey, all eight of the brands that joined the 2014 pledge have been contacted by The Cambodia Daily and asked if they had raised their prices. Only H&M and Primark replied, and even they declined to answer the question.

IndustriALL admits that the pledge lacks transparency. What the industry needs, it says, is a way to link the brands’ purchasing practices to rising wages. And that is what its new, multi-country program —ACT (Action, Collaboration, Trans- formation)—aims to achieve, starting in Cambodia.

The goal is to work with 14 international brands, including the eight that signed last year’s pledge, to create industrywide collective bargaining—not just over wages but other factors affecting costs, including leave and bonuses—backed by those brands’ purchasing practices, which cover the prices they pay but also contract lengths and other decisions.

“We can’t see into the contracts between the suppliers and the brands. The brands will say one thing, the suppliers will say another. So what we need to have is an actual transparent mechanism, not on the pricing perhaps, but on the commitments, so that we can see that there is this linkage,” said IndustriALL policy director Jenny Holdcroft.

“The problem is that this doesn’t exist anywhere in the world…so we are really starting from scratch,” she added.

Ms. Holdcroft said the current system set up by the Cambodian government for negotiating its $5.8 billion garment sector’s minimum wage won’t on its own deliver a living wage for the majority of the country’s more than 700,000 garment workers anytime soon.

“So what we’re trying to do is… develop this new mechanism which enables an industry-wide process that is linked clearly to the brand purchasing practices, so that there is actually a way of getting more of the value back through the chain so that there’s a possibility for employers here to agree to pay higher wages,” she said.

“The response from employers always is, ‘We can’t pay more’—and we hear this all the time in the government negotiations—‘because the brands are not paying us more.’ So that’s the part that we need to fix.”

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