How it all began
- The textile sector is vital for Bangladesh’s economy. Four million workers produce export goods worth around 35 billion dollars every year – that’s 85 percent of total exports.
- The Bangladeshi textile factories pay wages and buy raw materials in advance, try to meet tight delivery deadlines and usually end up with only a small profit. Business is dominated by Western textile companies such as C&A, H&M, Inditex (e.g. Zara) or Primark. They order the clothes and decide what’s produced and when.
- C&A has a special connection to Switzerland: its headquarters are in Düsseldorf (Germany), but the international textile company is controlled by Cofra Holding, based in Swiss canton Zug. Cofra Holding manages the assets of C&A’s founding family Brenninkmeijer, which, with an estimated CHF 15 billion in assets, is the eighth richest family in Switzerland.
- Like many other textile companies, C&A is publicly committed to greater sustainability and fairness in the supply chain. The company’s website states: “We focus on (…) ensuring that the people who make our clothes are safe and treated fairly and with dignity.” This commitment was put to the test by the Covid-19 crisis.
Beobachter, July 3, 2020
De Correspondent, July 22, 2020
REFLEKT (বাংলা), July 21, 2020
Dhaka Tribune, 22. Juli 2020
De Correspondent, 3. August 2020
The Correspondent, 4. September 2020
Crises & overreaction
- As a result of the pandemic, Germany and Switzerland announce the closure of all clothing stores on 16 March. One week later, Martijn van der Zee, C&A’s second in command, writes to suppliers in Bangladesh: “Extraordinary times call for extraordinary measures, (…) which put our partnership to the test.” C&A is cancelling all orders until the end of June with “immediate effect”, regardless of their production status. Even clothes that have already been sewn will remain in the warehouses.
Message from C&A to the producers in Bangladesh
(Original document, 23 March 2020)
- C&A is not the only company that has abruptly stopped large orders in Bangladesh. In total, orders worth 3.2 billion dollars were cancelled or suspended. That’s almost a tenth of the country’s annual textile exports.
- For the first time, a detailed data set, available to Swiss investigative platform REFLEKT, shows which fashion brand has cancelled orders from which factories. In March 2020, the Bangladeshi textile export association BGMEA asked its members: Which international fashion chains are cancelling or suspending orders? How much money/clothing is at stake? And how many employees are affected? The data set lists 7854 cancelled or postponed orders from the fashion industry worldwide, including orders from Switzerland. We are publishing the date set in its original form and have only removed the names of the suppliers in Bangladesh to prevent any negative consequences for them. It is an incomplete snapshot that provides an exclusive insight into the mechanisms of the fast fashion industry.
BGMEA database with cancelled and stopped orders
(Excel file, end of March 2020)
- C&A alone is said to have stopped orders worth 166 million dollars. The Swiss fashion chain Tally Weijl stopped orders worth 7 million dollars and cancelled orders worth 3 million dollars, according to the data set. At the end of June, Tally Weijl spoke to REFLEKT of cancellations worth 2.17 million dollars. The number of cancellations was exceptional, but only items that had not yet been in production were cancelled, the company stated. There would be no additional costs for the suppliers, as Tally Weijl could use the raw materials in other ways.
A legal dilemma
- Since the producers in Bangladesh are not even getting paid for already produced goods, they lack money for wages. In mid-April, thousands of seamstresses take to the streets – some demanding their wages, others the reopening of their factory and yet others that their factory remain closed because of Covid-19. Dozens of people are injured and two women are said to have been killed in the demonstrations.
- Kulsum (name changed) is one of the seamstresses who sew clothes for C&A in Bangladesh. Like many of her colleagues, she fears for her existence.
Poor people die at the will of the Almighty.
Kulsum (name changed), seamstress for C&A in Bangladesh
- C&A justifies the cancellations, which are partly responsible for the chaos in Bangladesh, with the closure of its stores in Europe. The producers could not expect that the group would “keep and/or fulfil its contracts” in such an exceptional situation, the company writes in an e-mail. C&A argues that according to German law, it is allowed to suspend or cancel orders in cases of force majeure.
- According to experts, this assumption is disputed. The New York lawyer Alan Behr, who specializes in the fashion industry, told REFLEKT: “The reference to force majeure could be unjustified, as most force majeure clauses do not include pandemics as a reason for non-payment”. Only a court of law could give a final ruling on the case.
- However, it is unclear whether such a legal dispute will ever take place. For the manufacturers, the orders are vital for survival – if they upset large customers such as C&A, they risk that the companies will order from other producers or even in other countries.
The brands back down
- In Bangladesh, the manufacturers decide to take an unusual approach in their greatest distress: They publicly denounce their customers’ methods and ask them to pay the outstanding debts. “Our situation is apocalyptic,” says Rubana Huq, president of the Bangladeshi textile export association BGMEA, at the end of March. “The canceled and suspended orders from Western fashion houses are bringing us to the brink of ruin.”
- Because the media are reporting on the abuses in Bangladesh, C&A and the other textile companies are coming under pressure. At the end of April Martijn van der Zee asks the suppliers in Asia for understanding: “We know that our first letter shocked you (…). We too were hit hard and at the time had no other option but to take drastic measures immediately.” C&A will pay for the goods already shipped and take over the majority of the clothes ordered. On 23 April, the Swiss Cofra Holding issues a press release saying that C&A has resumed 93 percent of the cancelled orders. Even upon request, C&A does not want to specify to which countries of production and what period of time this figure refers.
- A supplier in Bangladesh told REFLEKT at the beginning of May: “C&A is still stopping orders.” At the same time, the Bangladesh Garment Manufacturers and Exporters Association, after questioning its members, comes to the conclusion that C&A wants to definitely cancel 40 percent of the orders, resume 20 percent in December and the remaining 40 percent next year.
- Other textile companies such as H&M, Inditex and Primark are also reactivating parts of their stopped or cancelled orders. The US non-governmental organization Worker Rights Consortium, which campaigns for workers’ rights, operates a Covid-19 tracker on its website with the latest statements of the most important companies.
The damage is done
- On 1 May Kulsum returns to her workplace in the factory. She is paid 60 percent of her April wage, the money for which comes from government loans, which the factories have to repay with 2 percent interest.
- Although the factories are reopening, there is still a lot of money missing in Bangladesh. At the beginning of June, Rubana Huq of the textile export association BGMEA announced that only 1926 out of 4500 factories had resumed production – due to the shrinking orders, capacity utilization was only 55 percent. Due to the stopped orders, 430 million dollars were still missing to pay the wages. Up to one million jobs were at risk in the textile sector alone.
Up to a million workers could be impacted.
Rubana Huq, president of the textile export association BGMEA
- A spokesman for C&A states: “Complete production of all the old orders is not possible and does not make sense, because production in many supplier countries was completely interrupted for several weeks and can currently only be resumed to a limited extent in order to protect the factory workers”.
- Scott Nova of the US non-governmental organisation Worker Rights Consortium assumes that C&A has reactivated about 90 per cent of the orders that were stopped. This puts the company in a better position than other companies, but the problem is not solved. The textile company still wants to delay orders for up to one year, which would be equivalent to a cancellation.
- In addition, conservatively calculated, 20 to 30 million dollars of C&A funds are still pending in Bangladesh. Two to three million dollars of this is missing from salaries, which is equivalent to the monthly wages of 20’000 to 30’000 seamstresses.
This research was published on 21 July 2020 – at a time when current figures & company statements were still changing and numerous questions had to be left open.
The following organisations provide an updated overview of the behaviour of textile companies during the Covid-19 crisis:
– Business & Human Rights Resource Centre: How did the companies officially communicate?
– Workers Rights Consortium: Which companies have agreed to pay for orders that have been completed and were in production?
What remains unclear: What happens to the orders that were not yet in production? Are the companies keeping their promises and will they, as announced, accept their orders? When will the postponed orders be paid? How does the postponement affect the business of 2021 and the Bangladeshi textile industry in general?
Some contributors to this research were supported by the European Journalism Covid-19 Support Fund.
This research involved four people over a period of about three months. After the lockdown in Europe in March 2020, when the crisis of the textile industry in Bangladesh began, our team collected first data and contacts in Bangladesh as well as in Germany. We spoke to more than ten seamstresses from factories in Dhaka, which according to an internal database produce for European fashion brands such as C&A. Due to the limited freedom of movement, we had photos and videos of the seamstresses sent to us, showing them in the vicinity of their factories or at protests. In addition, we established contact with Bangladeshi employee and employer representatives, who provided us with up-to-date information from the field. In total, we conducted dozens of interviews with industry experts and other sources in four countries and read countless reports, studies and articles on the subject of fast fashion.
In the name of transparency and public interest, we openly publish selected original documents as well as useful links.
Please go to the German version for the background materials.