Most research on private governance examines the design and negotiation of particular initiatives or their operation and effectiveness once established, with relatively little work on why firms join in the first place. We contribute to this literature by exploring firms’ willingness to participate in two recent, high-profile private initiatives established in the aftermath of the Rana Plaza disaster in the Bangladesh ready-made garment (RMG) sector: the Accord on Building and Fire Safety and the Alliance for Worker Safety in Bangladesh. Using novel shipment-level data from U.S. customs declarations, we generate a set of firms that were “eligible” to join these remediation initiatives. We are able to positively attribute only a minority of US RMG imports from Bangladesh to Accord and Alliance signatories. Firms with consumer-facing brands, publicly-traded firms, and those importing more RMG product from Bangladesh were more likely to sign up for the Accord and Alliance. Firms headquartered in the USA were much less likely to sign onto remediation plans, especially the Accord.
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Locke et al. (2013) also note that, from the point of view of suppliers, which often produce for multiple brands, the multiplicity of codes can lead to “monitoring fatigue” and “compliance limbo.”
See Zajak (2017), however, for an argument that the Accord could be used by unions’ opponents to further undermine them.
In 2016, IndustriALL Global Union and UNI Global Union brought claims to the Permanent Court of Arbitration at The Hague, specified in the Accord. The claimants argued that two global brands had failed to address hazards identified in the Accord’s inspection reports, despite promises to do so. Settlements were reached in December 2017 and January 2018; citing fulfillment of the settlements, the parties terminated the arbitration claims in July 2018. The identities of the brands were not disclosed (as a condition of the settlement), nor was the amount of the first settlement. The second settlement required the brand to pay $2 million for safety improvements in supplier factories, as well as $300,000 to the unions’ “supply chain worker support fund.” See Houssart et al. (2018) for an analysis of these cases.
Information on the Accord’s signatories and governance, and on its factory inspections and remediation plans, is available at http://bangladeshaccord.org/
Other firms, such as the Walt Disney Company, decided not to produce at all in Bangladesh, citing reputational risk (Bartley et al. 2015).
“Accord, Alliance or Disunity.” The Economist, July 13, 2013; Steven Greenhouse and Elizabeth A. Harris, “Battling for a Safer Bangladesh,” New York Times, April 21, 2014.
The most recent data are available in the Accord’s October report, https://admin.bangladeshaccord.org/wp-content/uploads/2018/12/Accord_Quarterly_Aggregate_Report_October_2018.pdf
http://www.bangladeshworkersafety.org/488-2018-annual-report-press-release; call volume averages calculated from http://www.bangladeshworkersafety.org/progress-impact/helpline-statistics
As of March 2019, 192 retailers and brands had signed the Transition Accord, which took effect on June 1, 2018. http://www.industriall-union.org/signatories-to-the-2018-accord
For a comparison of the two initiatives, see Donaghey and Reinecke 2018.
Better Work is a multi-stakeholder partnership, focused on the garment sector, with participation from governments, global brands, factory owners, labor unions and workers. As of late 2019, it operated in eight countries, including (since late 2014) Bangladesh.
Hsueh (2017) assesses the determinants of firm participation in voluntary environmental programs. She finds that firms with more employees, revenues and assets, as well as those with a chief sustainability officer, are more likely to participate. She does not, however, consider firms’ brand identity, their nationality of ownership or their ownership structure. See Chrun et al. (2016) for a similar analysis.
One also might view participation in private initiatives as driven by a desire to pre-empt stricter state regulation (Bartley 2018; Vogel 2010). But given that the government of Bangladesh has not acted to regulate RMG strictly, given its own political incentives, this is unlikely to motivate foreign brands. Avoiding regulation or legal action in their home countries, however, may play a role in brands’ decisions.
Malesky and Mosley (2018) discuss how the incentives for labor-related upgrading differ between firms selling final goods and those selling intermediate products.
For broader arguments about supply chain transparency in the apparel industry, see https://www.hrw.org/report/2017/04/20/follow-thread/need-supply-chain-transparency-garment-and-footwear-industry
Sasser et al. (2006) note that NGO targeting may push firms away from, rather than toward, participation in private governance schemes. Nikolaeve and Bicho (2011), however, find that media exposure renders firms more likely to participate in the Global Reporting Initiative (GRI).
But see Schuessler et al. 2019 for an investigation of why Australian and German firms participate in the Bangladesh Accord.
We consider a shipment to originate in Bangladesh if the “shipper address” field contains a Bangladeshi address. In this way we are able to pick up the extensive transshipping of RMG goods through third ports, typically Colombo, Hong Kong, or Singapore.
To develop a benchmark, we consulted Eurostat’s directional trade data to calculate a very rough price per kilogram for RMG exports from Bangladesh. To an initial approximation, it appears that our bill of lading data account for about 40–50% of US RMG imports (by value) from Bangladesh during the periods we cover.
Inference for the models reported is unaffected by this decision.
The multinomial model over a dataset excluding the one firm choosing “both” fails the Hausmann-McFadden test for violations of IIA.
See Appendix Tables 5 and 6 for full listings of signatories.
Bayesian logistic regression (with Cauchy priors), and fitting with each covariate, one at a time, yielded substantively similar results.
Relative risk can be defined as Pr(Y = 1|X = x1) / Pr(Y = 1|X = x2), where x1 and x2 are two different values of the covariate X. A relative risk >1 describes the factor by which the change in X represented by x1 – x2 increases the probability of an event; a relative risk <1 is the factor by which this difference decreases the probability of an event.
But, given that many apparel industry firms source from the same supplier factories, it may be that the Accord and Alliance nevertheless cover a larger majority of the RMG production in Bangladesh, more of a win for workers.
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Ahlquist, J.S., Mosley, L. Firm participation in voluntary regulatory initiatives: The Accord, Alliance, and US garment importers from Bangladesh. Rev Int Organ (2020). https://doi.org/10.1007/s11558-020-09376-z
- Supply chains
- Private governance
- Worker rights